Financial Management
Tax Management
February 03, 2023
Legal limits in the development of business tax planning
DOI: 10.22167/2675-6528-20230006
E&S 2023,4: e20230006
Marcela Robles Queiroz e Leonardo Cosme Formaio
The analysis on the legal limits affecting the development of tax planning aims to present its relevant importance for companies, in such a way that tax planning carried out assertively and effectively consists of reducing the high tax burden existing in Brazil[1]. What does tax planning do?
Tax planning, in addition to allowing the reduction of the amount of taxes by postponing payment without incurring fines, penalties, and the occurrence of the taxable event, is the legal way to decrease the tax burden. There are two factors that determine the importance of tax planning in companies, namely, the high fiscal burden and the complexity of the existing tax legislation[2], [3]. It is important to note that the constitutional principles that support the development of corporate tax planning are Tax Avoidance and Tax Evasion.
Tax avoidance must be considered an effective method, being the lawful way available to taxpayers who aim for a less burdensome tax burden and which presents legal limits, being a practice accepted by the legal system, thus opposing illicit and illegitimate practices. In contrast, there is tax evasion, which consists of carrying out illicit acts, such as fraud, tax evasion, and simulation, to avoid paying taxes[4].
Furthermore, the importance of tax planning consists in reducing the business’s tax burden, being carried out lawfully, within the applicable legal limits, aiming at the analysis of the real motive sought by the taxpayer, that is, whether the planning’s purpose is tax economy or tax evasion.
In this context, the problem consists of developing an assertive and effective tax planning, generating tax reduction, as well as its applicable legal limitations and the scope of the sole paragraph of article 116 of the National Tax Code[5].
The research conducted and the practical case analyzed made it possible to identify the existing legal limits in tax planning, its principles, and its fundamental importance and applicability, thus aiming for assertiveness in reducing the tax burden with bases provided for in the legislation.
Currently in Brazil, there is a complex tax system and legislation with established rules and norms that overload the understanding of which is the best taxation regime and which taxes apply to business. To assist in the taxation of companies with the reduction of high tax burdens, tax planning emerged, which aims at the optimization of the reduction of the tax burden in a lawful manner and a better understanding of current legislation[6], [7].
Business tax planning aims to evaluate the business, applying the appropriate tax legislations and, consequently, reducing exorbitant payments and avoiding tax losses, double taxation, and high payments of unnecessary taxes for the business.
For the development of tax planning, Fiscal Evasion and Tax Evasion are relevant principles. Regarding Fiscal Evasion, it is something lawful that avoids or reduces the incidence of taxes, whereas in the case of Tax Evasion, it is something unlawful, which generates intent, fraud, and the practice of illicit business[6].
In order to ensure effective and assertive tax planning, it is supported by Tax Avoidance, with the purpose of avoiding legal penalties, being a broader and more comprehensive concept of carrying out planning within the law.
It is important to note that legal limits aim to analyze the real motive behind the taxpayer’s intended reduction of the tax burden, verifying if such a method truly and lawfully characterizes tax savings in the business. This concept aligns with the duty to pay and does not oppose tax avoidance, provided that simulation, which aims to reduce the tax burden by using atypical means to conceal a hidden transaction, does not occur.
Regarding the legal limits (article 116 of the National Tax Code – CTN[5]), it is important to remember that many scholars understand it as an anti-avoidance rule, aimed at opposing the dissimulation of the real tax-generating event, which conceals the actual activity to benefit from the reduction of the tax burden. The anti-avoidance rule does not aim to combat tax avoidance, but rather tax evasion[2], [3]. Thus, the legal aspect developed in article 116 of the National Tax Code[5] is a legal imposition, which determines as a limit in tax planning the illicit way of concealing activity to benefit from the reduction of the tax burden. It is of fundamental importance for the taxpayer to benefit from the reduction of the tax burden lawfully, with the use of assertive tax planning that aims to analyze the real business and the best Tax system, where a reduction in the tax burden and, consequently, savings in tax collection will be possible.
The doctrinal manifestations regarding article 116 CTN[5] define the understanding as the anti-avoidance rule, which aims at the lawful form of carrying out tax planning. It is necessary to consider that tax planning has legal bases that aim at tax reduction, as the taxpayer has the right to improve the structure of their business, thus seeking cost reduction, including taxes unnecessary to the nature of the business operation, contributing to better fiscal and financial regularity of the company.
The applicability of tax planning in companies, and the analysis of the applicable legal limits, must be carried out within the legally established frameworks, in such a way that they lead to a lawful reduction of the tax burden, avoiding penalties, non-payment of taxes, and fiscal burdens on companies.
The analysis carried out consisted of the installation service of air conditioning units with partial and total global contracting, requiring the development of engineering projects with the supervision of specialized engineers and teams at the locations where the services are performed, as well as the application of essential materials intended for the execution of services and the installation of equipment.
For the performance of air-conditioning installation services, contained within civil construction services, it is essential to have engineers involved, as provided for in Article 7 of Section IV of Law 5194/1966[8], which regulates the exercise of the engineering profession. Among the activities and attributions of an engineer, we have some examples: planning, design, supervision, and execution of the work; services which are listed within civil construction.
As provided for in Article 156 of the 1988 Federal Constitution[9], [10], the Tax on Services of Any Nature (ISSQN) is a tax within the competence of the Union, the States, the Federal District, and the Municipalities, and, in Article 146, item III of the same Constitution, it establishes as general rules that each municipality needs to regulate the tax, always respecting the dictates of Complementary Law 116/2003[5], which regulates the service tax nationwide.
In Complementary Law 116/2003[5], there are some important articles. Article 3 lists the services that characterize the incidence of ISS. For service 7.02, related to civil construction, it is found in item III of the aforementioned article. Article 7, in its second paragraph, establishes that the calculation basis for services performed in civil construction related to engineering will be the price of the service, excluding the materials applied in the execution of the services.
It turns out that, in the aforementioned Law, there is no characterization of applied material or permitted percentage for deduction, only that materials are not included in the calculation base of the ISS, generating several impasses related to the real interpretation of the Legislation by the fiscalizations and Municipal Laws.
It is worth remembering that the services subject to ISS retention, considered in Article 3 of Complementary Law 116/2003[5], are due in the place where the service is provided, and it is of utmost importance to observe, in addition to the aforementioned Law, the Municipal Laws where the service was provided, as this will be the place for the due tax collection.
Given some impositions by municipal inspections, regarding applied materials, where many understand as incorporated material to the work that which cannot be removed from the site, such as cement, this material requires a new construction to be removed, where it will be totally dismantled. As another example, the screw can be cited, which is understood to be removable, not being incorporated into the work, this fact opposes Complementary Law 116/2003[5], regarding materials applied in the provision of services that do not integrate the tax base. In other cases, there are municipalities that do not allow the deduction of applied materials, forcing the retention of ISS on the total service value, including applied materials in the tax base, thus causing double taxation of the tax, thereby generating distinct understandings among municipalities regarding the legislation regulating ISS, which is Complementary Law 116/2003[5].
In the installation service of air conditioning units, such units and materials used have already been taxed by ICMS, as in practice the ICMS has its value included in the price of the product at the moment of its sale or the service provided.
It is worth remembering that construction materials, as of 2009, were subject to the ICMS tax substitution system in member states. Therefore, it can be analyzed that the ICMS is collected by the industry throughout the circulation of goods until they reach the final consumer, which is why it cannot be taxed by the ISS. The ISS is mandatorily taxed only on the service performed, with the material or equipment deducted from the ISS calculation base[11], as provided for in Complementary Law 116/2003[5], thus avoiding double taxation of the tax.
Thus, determining the inclusion of materials in the calculation base of the ISS leads to the understanding of taxing twice, different taxes, for the same taxable event. That is, ICMS has already been taxed on the circulation of goods until it reaches the final consumer, which in some States is taxed by tax substitution. If the materials are included in the ISS calculation base, there will thus be taxation by the latter as well. It is evident that materials acquired from third parties and applied in the construction cannot be part of the ISS calculation base, and therefore must be deducted from the tax calculation base.
It is necessary to consider that some municipalities strictly follow Complementary Law 116/2003[5], allowing the deduction of materials from the ISS calculation base without limiting the deduction percentage. Other municipalities create rules and limits related to the allowed deduction percentage, and there are others that do not allow the deduction, thus being in disagreement with the tax’s regulatory Law.
It should be noted that the present research aimed to present the importance of effective and assertive tax planning, carried out through the analysis of the business and the adaptation of the tax system in the company, thus avoiding the exorbitant payment of taxes. However, with the use of Tax Evasion, we can have lawful tax planning and thus achieve savings in the tax burden[12]. The sole paragraph of article 116 of the National Tax Code[5] and doctrinal manifestations are well articulated and defined, concluding that its objective is to avoid tax dissimulation, which occurs illicitly. In this context, it is worth remembering that the objective was to demonstrate the oppositions related to Complementary Law 116/2003[5], which regulates the tax on any service, which significantly impacts some aspects related to the tax burden, generating double taxation in the incidence of the tax on any service (ISS) and, consequently, generating a burden for businesses. As a result, it was found that it is of fundamental importance to review municipal legislation or include a regulation in Complementary Law 116/2003[5], with the definition of materials that can be deducted from the tax base and their percentages. With the elaboration of a single regulation, it will be possible to avoid different interpretations by municipal tax authorities related to the subject matter, thus avoiding double taxation.
References
[1] Sabbag E. Manual de direito tributário. 5ed. São Paulo: Editora Saraiva; 2013.
[2] Borges H.B. Planejamento tributário. 12ed. São Paulo: Editora Atlas; 2012.
[3] Borges H.B. 2011. Gerência de Impostos. 7ed. São Paulo: Editora Atlas; 2011.
[4] Rodrigues A.O; Proença A.E.; Busch C.M.; Garcia E.R.; Toda W.H. Aspectos jurídicos do Planejamento Tributário. 1ed. São Paulo: IOB; 2012.
[5] Brasil. Presidência da República. Lei n. 116, de 31 de julho de 2003. Dispõe sobre o Imposto Sobre Serviços de Qualquer Natureza, de competência dos Municípios e do Distrito Federal, e dá outras providências. Brasília, DF; 2003.
[6] Torres R. Planejamento tributário. 2ed. Rio de Janeiro: Editora Elsevier; 2013.
[7] Brasil. Presidência da República. Lei n. 5172, de 25 de outubro de 1966. Dispõe sobre o Sistema Tributário Nacional e institui normas gerais de direito tributário aplicáveis à União, Estados e Municípios. Brasília, DF; 1966.
[8] Brasil. Presidência da República. Lei n. 5194, de 24 de dezembro de 1966. DF, Senado Federal. Regula o exercício das profissões de Engenheiro, Arquiteto e Engenheiro-Agrônomo, e dá outras providências. Brasília, DF; 1966.
[9] Brasil. Presidência da República. Emenda constitucional nº 3, de 17 de março de 1993. Brasília, DF; 1993
[10] Brasil. Presidência da República. Constituição da República Federativa do Brasil. Brasília, DF; 1988.
[11] Brasil. Supremo Tribunal Federal (STF). Tema 247 – Incidência do ISS sobre materiais empregados na construção civil. 2020. Disponível em: <https://portal.stf.jus.br/jurisprudenciaRepercussao/verAndamentoProcesso.asp?incidente=3771005&numeroProcesso=603497&classeProcesso=RE&numeroTema=247>.
[12] Machado, H.B. Introdução ao planejamento tributário. Vol. II. 2ed. São Paulo: Malheiros Editores; 2014.
Como citar
Queiroz M.R.; Formaio L.C. Limites jurídicos na elaboração de um planejamento tributário empresarial. Revista E&S. 2023; 4: e20230006.
Sobre os autores
Marcela Robles Queiroz, Graduada em Ciências Contábeis, Especialista em Gestão Tributária, Diadema, SP, Brasil.
Leonardo Cosme Formaio, Mestre em Direito Negocial, Especialista em Direito Empresarial, Londrina, PR, Brasil.
Link para download: https://cms.revistaes.com.br/wp-content/uploads/2023/02/ES_23006_.pdf