The technological revolution we experience day after day is transforming human relationships, bringing advances in the areas of communication, services, and, above all, the industrial sector. Never before in human history has there been such rapidity and advancements brought about by digital and technological transformation, which certainly allows us to affirm that a technology essential for today may become obsolete tomorrow. In an increasingly short-term and competitive world, failing to adapt to the new rules of the game can leave you out of the running.
As expected, industries invest heavily in software to automate their entire production chain. It’s no exaggeration to say that this technological mechanism is the brain of the entire company, controlling everything from cash flow, costs, and expenses to inventory management and keeping the production cycle and costs under control—to name just a few examples of its essential role.
The cost of acquiring and maintaining this software is far from insignificant, but the question remains whether these expenses generate PIS/COFINS credits. Although essential and relevant to industrial activity, the Federal Revenue Service understands that these expenses do not fall under the concept of inputs established by the PIS/COFINS legislation and, therefore, cannot generate credits for deduction of the contributions due.
On the other hand, the IRS stated that software directly applied to industrial process automation can generate PIS/COFINS credits, provided it coordinates the operation of machinery and equipment used in the production chain and is incorporated into intangible assets. However, expenses for repairs, maintenance, and replacement of parts that do not extend the useful life of these assets by more than one year are considered inputs for the IRS and, therefore, eligible for crediting against contributions.
In our view, the Federal Revenue Service’s approach is open to criticism, because restricting the right to credit solely to software intended for the production system fails to understand (or pretends not to understand) the operational reality of an industry. Furthermore, following the concept of input introduced by the Superior Court of Justice (STJ), concluding that these expenses are neither essential nor relevant to the taxpayer’s activity in the midst of the technological era is undoubtedly swimming against the tide.
The understanding, however, could be worse, as at least the right to credit for expenses for the acquisition and maintenance of software applied in the automation of the production process was recognized, provided that, it is worth remembering, they are incorporated into intangible assets.
