Last November 11, the Federal Government published Decree 10,854/2021, which, among several other provisions, changed the rules applicable to the deductibility of expenses under the Worker's Food Program - "PAT" from the calculation basis of the Corporate Income Tax - IRPJ.
The Decree amended the wording of Article 645 of the Income Tax Regulation - RIR/2018, as follows:
- The PAT deduction will only be applicable in relation to employees with wages of up to 05 (five) minimum wages, including all workers of the beneficiary company, in cases of in natura supply or distribution of food through collective food suppliers; and
- The expense deduction is now limited to the amount of one (01) minimum wage per employee.
So far, the Federal Government has not provided clarification on the application of the decree, especially if the limitation should be computed by the number of employees of the taxpaying company or on the overall value of expenses with PAT.
The case law of the Superior Court of Justice has long ruled out restrictions on the deductibility of PAT expenses established through Executive Branch decrees, as they exceed the limits of the regulatory power and violate the principles of legality and hierarchy of rules. With respect to the recent Decree 10854/2021, not only is there clear disrespect to the principle of legality, but also to the principle of anteriority, since the change takes effect as from December 2021, and not only in the following year.
Considering the established jurisprudence on limitations to deductibility of expenses with PAT, instituted by Federal Government Decrees, it is recommended that companies file a lawsuit in order to put an immediate end to these new restrictions.
For further information, please contact the Tax Litigation team at our office ([email protected]).
