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The Brazilian Supreme Federal Court (the “Court”) on May 13 concluded the judgment of the final motion on its 2017 precedent-setting decision, holding that the Brazilian State-level VAT (‘ICMS’ in Portuguese) should not be included in the tax base of the Federal Social Contributions on Gross Revenues (‘PIS and COFINS’). The Court’s latest ruling confirms the methodology for calculating the PIS and COFINS tax credit claims to which the taxpayers are entitled to - reaffirming that the claimable amounts correspond to the total output ICMS included in sales invoices. The justices ruled, however, that the precedent only applies as of March 15, 2017, except for taxpayers who already were litigating the matter before that date.

The conclusion of this judgment ends one of the largest tax litigation cases in Brazilian history, which has important implications for businesses, as well as for the market in general. The ramifications and credit monetization options derived from this decision should be analyzed on a taxpayer-by-taxpayer basis.