General Repercussion Theme No. 843: STF Rules that ICMS Presumed Credits Must Be Excluded from PIS and COFINS Tax Basis

On October 7, 2026, the Brazilian Supreme Court ("STF") concluded the trial of the Extraordinary Appeal No. 835,818/PR (General Repercussion Theme No. 843). The Court ruled that presumed ICMS (State Value-Added Tax on Goods and Services) tax credits must not be included in the tax base of PIS and COFINS contributions.

The Court established the following binding thesis: "The inclusion of presumed credits of the Tax on the Circulation of Goods and Services – ICMS in the tax base of COFINS and of the PIS contribution is incompatible with the Federal Constitution."

In its appeal, the Federal Government argued that, pursuant to the Constitutional Amendment No. 20/1998 and the enactment of Laws No. 10,637/2002 and 10,833/2003, the tax basis of such contributions corresponds to the total revenues earned by the legal entity. Accordingly, only amounts expressly excluded by law could be deducted from the tax base.

However, the STF dismissed the Federal Government's appeal. The prevailing understanding was that presumed ICMS credits do not represent revenue or an increase in net worth capable of being subject to PIS and COFINS. Otherwise, it would unduly broaden the tax base of these contributions.

The Court also stated that the accounting entry of the presumed credit does not, by itself, convert it into revenue.

The Justices did not address a possible limitation of the temporal effects of the decision (modulação de efeitos). This issue may still be raised through motions to clarify.

For further information about this Legal Update, please contact our Tax team