Some sugar and alcohol plants are managing to have recognized the right to use tax credits on agricultural inputs, and not just on industrial inputs. This type of cost, considered in law as "inputs inputs", are the heaviest for plants. Depending on the size of the company, recognition can represent gains of tens of millions of reais.

Two weeks ago, Tereos Açúcar e Energia Brasil obtained a favorable decision at first instance that annulled infractions that had been applied by the São Paulo Finance Department because it did not reverse ICMS credits related to the use of diesel in agricultural machinery in 2012 and 2013.

The Treasury understood that the company should have reversed credits of almost R $ 2.6 million related to the supply of fuel in third party machines. These machines, however, were at the service of Tereos' agricultural operation.

"The premise is that the fuel is used entirely in the plant's activity and, therefore, the company is entitled to full credit," said Isabella Pacífico, a lawyer who represented Tereos at Tauil & Checker Advogados.

Agricultural inputs have already been considered by the Federal Revenue as essential for sugar and alcohol activity in the case of PIS and Cofins credits, after a decision by the Supreme Court of Justice (STJ). In 2018, the court changed its understanding and started to define that, for PIS / Cofins credit, the concept of input should be evaluated for its essentiality or relevance to the activity.

Reflecting this change, the Federal Revenue published, in October 2019, normative instruction authorizing the use of PIS / Cofins credits on expenditures throughout the chain, including in the agricultural phase.

According to Celso Grisi, partner at Tauil & Checker Advogados, fuel, lubricants, machinery, spare parts, pesticides and other goods for cultural treatment can be considered as "input materials". The accounting of credits on these inputs was already a practice among the plants before 2019 - but when they were audited by the tax authorities, they were assessed. Now, companies can even review assessments received in the five years prior to the normative instruction of the IRS.

And the impact of recognizing these credits is not small. "We currently have, for a plant that invoices R $ 1 billion per year, about R $ 12 million in contingent liability resulting from this thesis", says Grisi, who cannot reveal the client's identity. In another case, of a plant that invoices R $ 1 billion that claims the ICMS accreditation on agricultural inputs, the contingency is R $ 62 million.