In a single-justice decision issued on 6 May 2026, the Brazilian Federal Supreme Court (STF) declined to allow ADC 98 (Declaratory Action of Constitutionality) to proceed. The action had been filed by the Presidency of the Republic to discuss the constitutionality of the statutory provisions governing the PIS and Cofins tax bases. PIS and Cofins are federal contributions levied on companies’ gross revenue and used to fund Brazil’s social security system.
ADC 98 sought to uphold those provisions, including Article 1 of Law No. 10,637/2002, Article 1 of Law No. 10,833/2003, and Article 2 of Law No. 9,718/1998. The action was based on the argument that the concepts of revenue and gross revenue should be interpreted without excluding any taxes from those bases.
The discussion gained relevance after STF Theme 69, the so-called “case of the century.” In that ruling, the STF held that ICMS (State VAT) is not included in the PIS and Cofins tax bases because it does not represent the taxpayer’s own revenue. Following that judgment, taxpayers began to challenge the inclusion of other amounts in the PIS and Cofins tax bases.
The main controversies still pending before the STF include:
- Theme 118: inclusion of ISS (Municipal Services Tax) in the contribution tax bases
- Theme 843: presumed or granted ICMS credits
- Theme 1,067: inclusion of PIS and Cofins in their own tax bases
In this context, ADC 98 could have broadly affected the review of these cases. By declining to allow the action to proceed, the STF preserved the general repercussion procedure, which is used to decide constitutional issues with binding effects for similar cases nationwide.
The decision also ensured that each controversy will be reviewed separately, based on its own legal grounds and votes. This prevents pending issues from being resolved through a generic ruling without consideration of the specific features of each dispute.
The decision is relevant for taxpayers because it preserves the review of the General Repercussion Themes and prevents, at least for now, a broad and abstract ruling on the so-called “spin-off claims” arising from STF Theme 69, which concern related disputes over the composition of the PIS and Cofins tax bases.
However, on 28 May 2026, the Federal Government appealed the single-justice decision. The next procedural developments should therefore be closely monitored, particularly given the relevance and potential impacts of the controversy.
Glossary:
PIS/Cofins tax base exclusion cases: Cases involving whether certain taxes or amounts should be excluded from the PIS and Cofins tax bases.
Declaratory Action of Constitutionality (ADC): A constitutional action used in Brazil to ask the STF to confirm that a law is constitutional.
ADC 98: A Declaratory Action of Constitutionality filed before the STF to confirm the constitutionality of certain statutory provisions.
PIS and Cofins: Federal social contributions levied on companies’ revenue.
Presidency of the Republic: The office of the President of Brazil.
STF Theme 69: A leading STF case concerning whether ICMS should be excluded from the PIS and Cofins tax bases.
Brazil’s social security system: The public system funded in part by social contributions such as PIS and Cofins.
ICMS: A Brazilian state VAT-style tax on sales of goods, interstate and intermunicipal transportation, and communication services.
Taxpayer’s own revenue: Revenue that legally and economically belongs to the taxpayer, rather than amounts collected on behalf of the government.
ISS: A municipal tax on services in Brazil.
State VAT: A simplified English reference used to help international readers understand ICMS.
General repercussion procedure: A procedural mechanism through which the STF selects constitutional issues with broader relevance and decides them with binding effects.
Presumed or granted ICMS credits: ICMS tax credits granted by law or by tax incentive programs, rather than generated directly by ordinary tax payments.
Spin-off claims: Related claims that arise from or are inspired by a leading tax case.
General Repercussion Themes: Issues selected by the STF for decision under the general repercussion procedure.
