There has been a long controversy surrounding the taxation of PIS/Cofins on amounts resulting from debt forgiveness.

On the one hand, there are those who argue that, since debt forgiveness is a write-off in companies’ liabilities — coinciding with the accounting concept of revenue —, it should be included in the calculation basis for these contributions.

On the other hand, there are others who argue that the accounting and tax concepts of revenue are distinct. In order for there to be revenue, from a tax perspective, a new and permanent entry into the company’s assets is necessary, which is not the case with debt forgiveness.

In the context of companies undergoing judicial recovery, this issue has apparently been resolved with the entry into force of Law No. 14,112/2020. This rule now provides that debt forgiveness — called haircut in the context of judicial recovery — is, as a rule, not taxed by PIS/Cofins.

However, one question remains: did the new rule create a tax exemption hypothesis or, in practice, did this incidence never exist, with the law merely clarifying the reality and providing security to the legal system? After all, is debt forgiveness a taxable income?

In a recent decision by the Regional Federal Court of the 2nd Region, reported by Judge Marcus Abraham, a case involving debt forgiveness of a company in judicial recovery was analyzed. However, the provisions of Law No. 14,112/2020 were not applicable to that specific case. Even so, it was understood that the new law did not innovate the legal system. In other words, nothing has changed: it has always been necessary, for the purposes of levying PIS/Cofins, for there to be an effective and positive financial inflow into the company’s assets to configure income for the purposes of levying contributions.

This decision also seems to me to apply to companies that are not undergoing judicial recovery, but have forgiven debts and have started to tax the so-called “accounting income”, thus giving rise to the interest in recovering the amounts of PIS/Cofins unduly collected.

The discussion seems to be far from over and taxpayers need to remain vigilant so as not to bear unnecessary tax costs, and it is advisable to evaluate each case individually to decide whether to file a lawsuit to obtain a decision recognizing this right.

By Thiago Braga, associate at Candido Martins Cukier Advogados.