Unconstitutionality and double taxation on the same taxable event – COFINS and FUNRURAL

In September 2020, the Brazilian Federal Supreme Court (STF) started the judgment of the Extraordinary Appeal nº 700.922/RS (Topic no. 651 - General Repercussion), which debates the unconstitutionality of FUNRURAL (Contribution to the Assistance Fund for the Rural Worker) for companies that also pay COFINS (Contribution for Social Security Financing). The judgment was suspended because Judge Dias Toffoli requested further examination of the files, after two favorable votes to taxpayers and one vote against them (total of 11 votes).

In summary, the discussion relates to the unconstitutionality of FUNRURAL and the allegation of double taxation with COFINS. The reason is because COFINS’ taxable event is: (i) in the non-cumulative regime: the gross profit from (i.a) the sale of goods, (i.b) the rendering of services, (i.c) third-party account transactions, and (i.d) other income from the activity or from the main purpose of the company (Article 12 of Decree-Law Nº. 1.598/1977 and Laws Nº 10.637/2002 and 10.833/2003); or (ii) in the cumulative regime: the invoicing (Law nº 9.718/1998). On the other hand, afterwards FUNRURAL was created, and its taxable event is the gross revenue resulting from the sale of own production (article 25-A of Law nº 8.212/1991). Thus, in the case of a rural company producer, the taxable event of COFINS and FUNRURAL are the same: the amount invoiced derived from the sale or commercialization of own rural production. Therefore, double taxation on the same would be characterized, which one is void by the Federal Constitution.

Although STF has not yet judged the case, we have identified lower-level court decisions favorable to the taxpayers.

Based on this scenario and considering recent precedents from the STF related to the modulation of the effects, we recommend taxpayers to consider filing a lawsuit as soon as possible to guarantee the right to future non-payment and the refund of the FUNRURAL collected in the last 5 years from the lawsuit date, increased by the SELIC rate in case of a final decision favorable to taxpayers.


By Henrique Erbolato

New search

São Paulo

+55 11 3124 3070

Rua Funchal, 418
04551-060 SP Brasil

© 2022 Santos Neto Advogados

error: Content is protected !!