The 1st Ordinary Panel of the 2nd Chamber of the 3rd Section of CARF¹ (Administrative Council of Tax Appeals), in Ruling No. 3201-012.196, recognized the right of a digital retail company to claim PIS and COFINS² credits on certain expenditures considered essential and/or relevant to its operation. The company, which operates exclusively through the internet, claimed the essentiality/relevance of expenses related to internet advertising, marketing, provider services, maintenance and operation of electronic platforms, and IT services.

The decision explicitly adopted the understanding of STJ³ in Theme 779 (Special Appeal 1.221.170/PR), which established essentiality and relevance criteria as parameters for defining inputs in the non-cumulative tax system.

In this specific case, the tax authorities had initially denied the credits based on RFB⁴ Normative Instruction No. 404/2004. CARF, in partially overturning this denial, considered that due to the company’s business model — 100% digital, without physical presence — expenditures related to digital presence and operations are essential/relevant for developing its activities. Among the grounds adopted, the decision highlighted COSIT⁵ Normative Opinion No. 5/2018, which recognizes that the analysis of input concept must consider the nature of the taxpayer’s activity, respecting the criteria defined by STJ jurisprudence.

This decision represents another important step in consolidating the understanding that, in the digital context, certain expenses play a central role in companies’ operational structure and revenue generation, thus being eligible for tax credits. Although differences persist between the Brazilian Tax Authority and taxpayers — especially regarding the application of the input concept in non-manufacturing contexts — STJ jurisprudence and recent CSRF⁶ decisions (such as Rulings 9303-012.967 and 9303-013.243) have been recognizing the right to credits for companies whose activities require robust technological infrastructure and strategic digital presence.

In this context, companies operating in the digital environment can evaluate potential opportunities for PIS/COFINS credits on essential and/or relevant expenses for their activities, such as digital advertising, marketing, IT services, and electronic operation support.

Explanatory Notes:

¹ CARF: Administrative Council of Tax Appeals (Conselho Administrativo de Recursos Fiscais), Brazil’s highest administrative tax court

² PIS/COFINS: Federal social contributions levied on company revenues

³ STJ: Superior Court of Justice, Brazil’s highest court for non-constitutional matters

⁴ RFB: Brazilian Federal Revenue Service

⁵ COSIT: General Tax Coordination Office of the Brazilian Federal Revenue Service

⁶ CSRF: Superior Chamber of Tax Appeals, CARF’s highest instance