Publications

The recent decision issued by the Conselho Administrativo de Recursos Fiscais (CARF — Brazil’s Administrative Tax Appeals Council) in Administrative Proceeding No. 16327.000957/2005-26 represents an important milestone for tax disputes involving fintechs and financial institutions. In a unanimous ruling, the 2nd Panel of the 2nd Chamber of the 3rd Section applied Theme 372 from the Supremo Tribunal Federal (STF — Brazil’s Supreme Federal Court) and confirmed that recurring and regular financial income must be included in the tax base for PIS (Programa de Integração Social, a federal social contribution) and COFINS (Contribuição para o Financiamento da Seguridade Social, a federal contribution earmarked for social security funding).

What CARF Decided About PIS and COFINS

According to the panel, financial income derived from intermediation or investment activities, when earned on a regular and recurring basis, constitutes operating gross revenue for purposes of calculating these contributions. The decision broadly applies the understanding established by the STF in Theme 372, which rejected the distinction between financial and operating revenue for companies whose core business involves such activities.

The ruling also clarifies important procedural guidelines for administrative judgments: it rules out the possibility of suspending proceedings when the Supreme Court has not formally declared a law unconstitutional. In doing so, it reinforces the interpretation that applying the STF’s precedent does not depend on a formal declaration of unconstitutionality at the administrative level.

Impacts for Fintechs and Financial Revenue

For fintechs and other businesses whose models rely heavily on financial income, CARF’s position requires a strategic reassessment of their tax landscape. This includes, among other aspects: reclassifying revenue previously treated as non-operating; reviewing the tax base used to calculate PIS and COFINS; and reevaluating operational procedures for recognizing and categorizing financial income.

With this understanding becoming more solid within the administrative sphere, the room for defensive arguments before CARF narrows. As a result, individualized analysis of each business structure becomes even more essential, taking into account the criteria established by the STF and now reinforced by CARF.

The DGN team continues to closely monitor developments in tax litigation within the financial sector and is available to assess how this decision may impact your operations.

Contact our team to learn more.