Companies that receive insurance compensation for the loss of their assets—such as vehicle accidents—are exempt from paying income tax (IRPJ), social contribution (CSLL), social contribution (PIS), or social contribution (COFINS) on these amounts. This was the ruling of the Superior Court of Justice (STJ) in the AgInt ruling in Resp 2.140.074-SP.
The case involved a car rental company that received insurance compensation after accidents involving vehicles in its fleet. The question was: should these amounts be taxed as if they were company revenue? The Superior Court of Justice’s response was
no.
According to the Court, the compensation paid by the insurer does not represent profit, gain, or revenue. It is merely a recovery of assets—that is, compensation for the loss suffered. Therefore, there is no IRPJ or CSLL levy, as there is no real increase in the company’s assets, as required by law.
Furthermore, the Superior Court of Justice (STJ) also ruled that this type of compensation does not qualify as income for tax purposes. Therefore, it should not be included in the PIS and COFINS tax bases.
Although, in accounting, these amounts can be recorded as “revenue”, tax law has its own rules, and accounting classification alone does not determine whether or not an amount will be taxed.
Although the topic is not new, the decision constitutes an important precedent favorable to taxpayers, as it removes the Tax Authorities’ impetus to tax any and all amounts received simply because their accounting designation is “income”, to recognize that they will only be income, subject to taxation, if they comply with other tax precepts and principles.
