In a landmark decision with far-reaching implications for the industrial sector in Brazil, the Superior Court of Justice (STJ) unanimously ruled that companies are entitled to claim IPI (Tax on Industrialized Products) credits even when the final products they manufacture are tax-exempt or constitutionally immune—such as petroleum derivatives. This ruling, issued under the court’s repetitive appeals system (Theme 1,247), establishes binding precedent across the country.
The Case: COSAN vs. Brazilian Tax Authority
The case was brought by COSAN Lubrificantes e Especialidades S.A., which had been fined by the Federal Revenue Service for claiming IPI credits on inputs used to produce petroleum-based products. These products are immune from IPI under Brazil’s Constitution (Art. 155, §3), and lower courts had ruled that since the final products were not taxed, no credit could be claimed—arguing that “immunity” is not the same as “exemption” or “zero rate.”
STJ Clarifies: ‘Immunity’ Also Qualifies for Credits
Justice Marco Aurélio Bellizze, who authored the decision, overturned the lower court’s ruling, emphasizing that Article 11 of Law No. 9.779/1999 clearly allows IPI credits for tax-paid inputs used in the production of goods that are ultimately exempt, zero-rated, or immune from IPI. The word “including” (“inclusive” in the original Portuguese) used in the legal text was interpreted broadly by the Court to encompass all forms of tax relief, not just exemption or zero rate.
In short, if:
- The input was subject to IPI when purchased, and
- The input was used in an industrialization process (e.g., transformation, assembly, packaging),
then the manufacturer is entitled to a tax credit—regardless of how the final product is treated for tax purposes.
Clarifying the ‘NT’ Classification in the TIPI Code
One of the key challenges addressed by the court was the confusion around the “NT” (not taxed) label in Brazil’s TIPI classification system. This label is used both for items outside the scope of IPI (like raw agricultural goods) and for products that are constitutionally immune—a nuance often overlooked in tax audits.
The STJ clarified that just because a product is marked “NT” does not mean the taxpayer is disqualified from claiming IPI credits. If the product is industrialized and enjoys constitutional immunity (rather than being entirely outside the scope of taxation), the right to credit remains valid.
Broader Implications and Legal Certainty
This ruling strengthens the principle of non-cumulativity, a cornerstone of Brazil’s IPI regime, ensuring that taxes are not stacked up along the production chain. It also pushes back against a narrow, literal application of Article 111 of the National Tax Code, which requires strict interpretation only for exemptions—not constitutional immunities.
The court’s binding thesis is clear:
“IPI credits under Article 11 of Law No. 9.779/1999, for inputs used in industrial processes, are applicable even when the final product is exempt, zero-rated, or constitutionally immune.”
This means that both the judiciary and tax authorities must now recognize this broader interpretation.
Opportunities for Taxpayers: Recovery of Past Credits
The decision opens the door for companies—especially in the oil and gas, pharmaceutical, and food sectors—to recover credits that were previously disallowed or never claimed. Taxpayers who were fined or refrained from claiming these credits out of caution can now consider judicial or administrative measures to recover amounts from the past five years.
Conclusion: A Win for Legal Predictability and the Industrial Sector
This decision marks an important affirmation of the IPI’s non-cumulative logic and ensures that constitutional immunities are treated on equal footing with exemptions and zero rates for credit purposes. For tax advisors, in-house legal teams, and industrial taxpayers, this ruling will be a powerful tool in both strategic tax planning and litigation defense going forward.