The Administrative Council of Tax Appeals (Carf) started 2023 with changes and the expectation that great challenges will be solved. The body is already under the leadership of a new chairman, Carlos Higino Ribeiro de Alencar, appointed on January 5. Already on the 9th he publicized CARF/ME 455, which mandated suspension of all of Carf's judgments sessions for this month.

On January 12, several measures were published with the aim of reducing the fiscal deficit, by increasing tax collection and reducing the backlog of cases pending with Carf. Among the measures that directly impact on the Carf is the return of the casting vote in the event of a tie in the vote of the judging panels, revoking article 19-E of Law 10,522/02, which decided tie votes in favor of taxpayers.

With these relevant changes, and still expecting to maintain the level of debates and decisions at the Carf, we continue the trilogy of articles on the main topics decided by the panels of the Superior Chamber of Tax Appeals (CSRF) of Carf in 2022, with a retrospective of the issues debated by the 2nd Panel of the CSRF.

Responsible mainly for deciding cases involving social security matters and Withholding Income Tax (IRRF), the 2nd Panel of the CSRF also underwent changes in its composition that were reflected in changes in consolidated understandings after 2018.

There were only six meetings in the year 2022, due to the tax auditors' strike. However, these meetings were marked by debates that directly influenced some changes in understandings or even confirmation of others already consolidated by the 2nd Panel of the CSRF.

As for changes in understanding, we highlight the judgment in favor of taxpayers for the non-levying of social security contributions on profit sharing payments to non-employee directors (Appellate Decision 9202-010.354). The understanding was that there is no distinction between "employer" and "worker" when interpreting Law 10,101/00 or Law 8,212/91.

According to the decision, giving different tax treatment to profit sharing paid to employees and non-employee directors could violate the constitutional principle set forth in article 150, III, of the Federal Constitution. This issue was decided in favor of the taxpayer due to the application of article 19-E of Law 10,522/20 (repealed).

Still with regard to the payment of profit sharing, the Panel recognized, also by applying article 19-E of Law 10,522/20, that execution of a collective bargaining agreement on a date subsequent to the fiscal year to which it refers, by itself, is not a reason to rule out application of Law 10,101/00, i.e., to deconstitute (de-characterize, invalidate, undermine} the agreement and levy social security contributions on the sums (appellate decision 9202-010.357). In this specific case, the plan had already been repeated in previous years and this already indicated the predictability of the rules, necessary for characterization of the payments for profit sharing purposes.

In relation to the matter of incentive bonuses (hiring and retention), the prevailing understanding was that social security contributions are not levied on these amounts, which do not have the nature of remuneration (Appellate Decision 9202-1010.457). The panel found that payment of these bonuses represents fulfillment of civil obligations and not labor contracts, another issue decided due to the application of article 19-E of Law 10,522/02.

In 2023, it is possible for there to be revision of the case law on the issues decided based on application of the former article 19-E of Law 10,522/02. This is because, with the return of the casting vote, the majority of the board members representing the National Treasury have an understanding contrary to the prevailing theory in these specific matters.

With regard to the discussion of taxation of stock option plans offered by the company to its officers and directors and employees (stock options), a topic that will certainly be resumed in future debates with the 2nd Panel of the CSRF, the position was also favorable to the taxpayer (Appellate Decision 9202-010.506).

Until then, the prevailing understanding was that social security contributions should be levied on this amount. It was claimed that the shares were offered to employees in the context of an employment contract, which in itself would constitute a form of indirect remuneration.

In 2022, after much debate, the theory that social security contributions cannot be levied on this amount prevailed, since payments related to stock options are made by a third party. It is understood that stock option plans have a mercantile nature. The value of the share is paid by the market, therefore it is not to be confused with remuneration and should not be subject to social security contribution.

At the six meetings in the year 2022, old positions were maintained without any change in case law. Specifically regarding payment of hiring bonuses, the panel only confirmed the case law of 2021 finding for the impossibility of levying social security contributions (Appellate Decision 9202-009.762).

On the subject of merger of shares, there has been no change in understanding. The historical position (Appellate Decision 9202-010.045) was adopted that the shareholder of the acquired company, upon receiving the shares of the acquiring company with appreciation, will have a capital gain liable to income tax.

Despite the change in the composition of the 2nd Panel of the CSRF, with the return of the casting vote in 2023, continuity in solid decisions is expected, resulting from rich debates and surrounded by legal security.