On May 11, the 1st Panel of the Superior Court of Justice definitively maintained its position of allowing the levying of income tax and social contribution on the portion corresponding to the monetary correction of financial investments. Despite investors’ expectations and the partial score, which pointed to the opposite understanding, the court decided for the legality of the charge.
Financial application
Before discussing the merits of the issue, it is worth remembering the concept of financial investment. Briefly, this type of operation consists of the act of buying an asset, in the hope that it will appreciate over time and provide the investor with a financial return.
There are several types of financial investments available, which vary in terms of yield, maturity and liquidity. Bonds can be more conservative, such as, for example, some types of fixed income, or they can aim at greater profitability and risk, such as those susceptible to the variable market.
Decision merit
Thus, the winning thesis pacified the understanding that taxation is justified due to the fact that the difference provided by the monetary correction would add nominal value to the currency.
Despite the signs contrary to the ratification of the prevailing jurisprudence, the authorization of the charge prevailed, in line with what had already been determined by the 2nd Panel of the court, although several controversies hovered over the merits. The Valor Investe portal highlighted the request for a vote-view, in April, made by Minister Regina Helena, which increased market expectations in the final decision. For her – who followed the approach proposed by the rapporteur, Minister Napoleão Nunes –, monetary recomposition, as it does not represent an increase in assets, would have to be excluded from the current taxation. In her words, “monetary correction aims to preserve the purchasing power of the currency in the face of its nominal devaluation caused by inflation.” However, despite the optimism of investors, this position did not rise in the group.
On the other hand, Minister Gurgel de Faria voted to maintain the tax incidence and warned, as highlighted by Valor Investe, the risk of a change in this mechanism altering the dynamics of taxation in the country.
The session started on the 11th was, until that moment, with two votes to one for the overthrow of the taxation. However, ministers Benedito Gonçalves and Sergio Kukina, who had not yet taken a stand, manifested themselves against the taxpayer’s claim. Finally, Kukina summed up that the monetary correction will be included within what is understood as the acquisition of economic availability, being, therefore, subject to the levy of the withholding tax.
It is noteworthy that the Supreme Court understood that the matter is not constitutional. Thus, the Superior Court of Justice has the legitimacy to deal with the matter, and the court’s decision is, therefore, final.
