Tax credits of R $ 2 billion inject swell in retailers during the crisis

Brazilian retailers had an unexpected – and welcome – injection of resources amid the coronavirus pandemic. In recent days, companies such as Hering, Via Varejo and Lojas Renner have had recognized tax credits of almost R$ 2 billion. The financial compensation stirred the shares of these companies in B3, the São Paulo Stock Exchange, which rose in the wake of the extra financial breath. The good news for Hering – from a credit of R$ 280 million – came on Monday night. The result cheered investors on the role of the clothing network, which faced underwhelming results even before the coronavirus crisis. Hering's shares soared 11.7% on the day, closing up 4.55%, at R$ 13.09. In recent days, other companies in the industry had received the same news. The largest credit granted was to the Renner fashion chain, which raised R$ 1.3 billion, while Via Varejo (owner of the home appliance brands Casas Bahia and Ponto Frio), had a favorable decision in the amount of R$ 374 million. On Monday, the roles of both had a high: 4.7% (Via Varejo) and 1.6% (Renner). On Wednesday, 20, Renner maintained the earnings trend, while Via Varejo closed down. The market is excited because this type of extra credit brings more liquidity to companies at a difficult time. In Renner's case, the court decision should represent a net gain of R$900 million, equivalent to 3% of the company, according to Citibank. For XP analyst retail specialist Pedro Fagundes, if you consider the reported amount of tax compensation and a five-year period to use it, it is possible to calculate at a valuation of 3% in Renner's market value. "But this year, for example, this credit should not be used as much, because there will be less revenue generation," Fagundes said. Even if the effect is not immediate, it is good news. "At some point, this right will have an effect on cash," says Lucas Lima, an analyst at Toro Investimentos. The money does not go directly to the companies' cash register – it is, as the name says, credit with the IRS. The decisions are based on the understanding of the Supreme Federal Court (STF) that the amount due of ICMS, state collection, can not be accounted for with the revenues of companies for the calculation of the balances of PIS and Cofins, federal taxes. "The discussion seems to have high numbers, but it is because it has been a long time since this tribute is being charged. We have discussions on this matter in the office since 1999," said lawyer Ana Paula Faria, a partner at Gaia Silva Gaede Advogados, who defended Hering. In the case of Renner, the charges that generated the credit were made between 2001 and 2017, the year in which the Supreme Court made the decision on the calculation. The Supreme also considered that the value of ICMS is not revenue from the company, but rather a tax levied by the State that is simply collected by it. The effect of decisions will now multiply. "Virtually all companies filed such lawsuits," says Tércio Chiavassa, a tax partner at the law firm Pinheiro Neto. The fact that three lawsuits were decided in the same week is no coincidence – justice is trying to be more agile to help companies. "In times of pandemic, companies have sought to strengthen their cash. We have seen speed on the part of the courts in deciding on these actions," says Anna Flávia Izelli, partner at Felsberg Advogados. The pandemic had yet another practical effect. By determination of the National Council of Justice (CNJ), the deadlines of proceedings were suspended until the beginning of May, in the case of those with physical processing, and until the middle of the month, for digital. This reduced the time for the Union to present demonstrations in actions in which it is an interested party. This explains why Renner and Hering had such close favorable decisions: the two cases were filed in the Federal Regional Court of the 4th Region, in Porto Alegre (RS). They ran, therefore, in similar time limits, they reached the Superior Court of Justice (STJ) almost simultaneously and had final decision handed down on close dates. Since 2017, when there was the decision of the Supreme Court on the subject, the Union has filed an appeal to limit the value of ICMS subject to review. The demand would be voted on in April, but was removed from the agenda by the president of the court, Dias Toffoli. Last week, the Union sent a new petition calling for the nationwide stock to freeze. "The expectation is that Minister Carmen Lucia will not defer the request. The government's justification is that these actions represent a very large hole in the public coffers in times of pandemic", says Chiavassa.