By José Marcello Gurgel
The unanimous ruling of the First Panel of the Superior Court of Justice (STJ) in Theme 1,319 establishes a definitive milestone in the interpretation of Interest on Net Equity (JCP), legitimizing its deduction when calculated over profits from prior fiscal years and bringing an end to a decade-long tax controversy.
Introduction
On November 12, 2025, the First Panel of the Superior Court of Justice (STJ) issued a unanimous decision in the judgment of Repetitive Theme 1,319, consolidating a taxpayer-favorable understanding regarding the deductibility of extemporaneous Interest on Net Equity (JCP). The opinion, authored by Justice Paulo Sérgio Domingues, encompassed Special Appeals Nos. 2,162,629/PR, 2,162,248/RS, 2,163,735/RS, and 2,161,414/PR, establishing a binding precedent that resolves the longstanding interpretative divergence between the tax authorities and taxpayers.
The unanimity of the decision confers special weight to the precedent, which now binds all judicial and administrative bodies, including the Administrative Council of Tax Appeals (CARF), where the matter had generated persistent litigation. The judgment represents the culmination of a legal dispute triggered by the issuance of Federal Revenue Normative Instruction No. 1,700/2017, which restricted the temporal deductibility of JCP.
Brief Summary of the Controversy
Extemporaneous JCP refers to interest on net equity calculated over profits accrued in fiscal years prior to the corporate deliberation authorizing their payment. The controversy emerged because the legislation does not establish a specific deadline for such deliberation, giving rise to diametrically opposed interpretations by the tax authorities and taxpayers—a clash that intensified particularly after 2017.
The central question dividing these interpretations was whether a company could, in a subsequent fiscal year, resolve to pay JCP calculated on the net equity of prior years and deduct such amount from the Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) bases. This situation is common in corporate practice, especially in contexts of economic uncertainty, in which companies adopt conservative approaches and postpone distribution decisions to preserve resources for adverse scenarios.
The Federal Revenue Service established a restrictive interpretation, arguing that JCP may only be deducted in the year in which the profit used as its basis was generated. This position was supported by Normative Instruction No. 1,700/17, which in Article 75, Paragraph 4, states that “the deduction of interest on net equity may only be made in the calendar year to which the limits apply.” The tax administration argued that the accrual basis of accounting required annual recognition of the expense, prohibiting its postponement to future years.
Conversely, taxpayers defended the possibility of deducting JCP in the year of the deliberation, even when calculated over profits from previous fiscal years. Their position relied on the absence of any express temporal limitation in Law No. 9,249/95 and the technical understanding that the corporate deliberation constitutes the taxable event giving rise to the JCP obligation. Accordingly, this is the appropriate moment for accounting and tax recognition of the expense, regardless of the fiscal year that served as the basis for its calculation.
The Ratio Decidendi
The STJ established a binding thesis with exceptional clarity:
“The deduction of JCP from the IRPJ and CSLL tax bases is permissible when calculated in relation to profits from fiscal years prior to the deliberation authorizing their payment, provided that the legal requirements of Article 9 of Law No. 9,249/1995 are observed.”
The reasoning of the Superior Court is built on two doctrinal pillars.
First, it establishes corporate deliberation as the constitutive event of the deductible expense. The Court recognized that JCP, as a tax-deductible expense, arises from the willful act of the shareholders’ meeting or competent corporate body authorizing its distribution—not from the determination of the profit used as its basis. This temporal distinction is crucial to dismiss the mechanical application of the accrual basis.
Second, the decision reaffirms the supremacy of the principle of tax legality. The STJ held that the temporal restriction imposed by the Normative Instruction constitutes an improper infringement upon the legal order by an inferior regulatory act, violating the constitutional principle that limitations on tax rights may arise only from statutes. The absence of a deadline in Law No. 9,249/95 does not constitute a gap to be filled by the tax administration but rather a deliberate legislative choice.
The ruling also acknowledges the hybrid legal nature of JCP. Although, from an accounting perspective, it represents profit distribution, tax law classifies it as a financial expense by legal fiction. This duality justifies differentiated treatment compared to ordinary operational expenses, distancing it from rigid application of the accrual basis.
Practical Implications
The binding effect of the precedent generates immediate consequences in administrative and judicial disputes. CARF, which had maintained a position largely unfavorable to taxpayers, must now apply the STJ’s thesis, eliminating discrepancies between administrative and judicial spheres. This interpretative convergence restores systemic coherence and significantly reduces litigation on the matter.
For companies, the decision restores autonomy in managing distribution policies, allowing them to retain profits during periods of instability and deliberate on JCP payments in more economically favorable moments without losing the tax benefit. This temporal flexibility is particularly relevant for companies subject to volatile economic cycles or those adopting conservative cash-management strategies.
The decision also opens the possibility of recovering credits for companies that, over the past five years, refrained from deducting extemporaneous JCP due to fear of tax assessments or were effectively assessed and paid the resulting taxes. Recovery of such amounts may be sought through amendment of the Tax Accounting Bookkeeping (ECF) and other relevant ancillary obligations.
Final Considerations
The judgment in Theme 1,319 represents a clear victory for the principles of tax legality and legal certainty. By rejecting the infralegal restriction and recognizing the corporate deliberation as the taxable event giving rise to the deductible expense, the STJ establishes a precedent that strengthens predictability in the tax system and corporate autonomy in financial management.
The decision consolidates a technical-legal understanding that respects both the hybrid nature of JCP and the constitutional limits on the regulatory authority of the tax administration.
Thus, the controversy over extemporaneous JCP finds its definitive resolution, establishing a jurisprudential milestone that will guide both corporate practice and the conduct of the tax administration within the constitutional and legal framework.
