Court case law eliminates VAT crediting in compensations

On March 15, 2023, the Supreme Court approved a jurisprudence establishing that civil compensation, which is a way of extinguishing reciprocal obligations between the creditor and the debtor, is not a means of payment of the value-added tax (VAT) for the purposes of its crediting and refund.

Therefore, even if the main obligation is civilly extinguished, the offsets do not generate the right to credit VAT, so it will not give rise to its credit or refund until there is actually a cash flow.

The jurisprudence will result in greater scrutiny of taxpayers of this tax. This position will affect various operations, for example, the centralized treasury. In addition, the impact in different scenarios must be analyzed, such as the retroactivity of the jurisprudence, the use of compensation in the last five years of returns, audits in progress, possible lawsuits for damages, ISR deductions for non-creditable VAT and the effects on interest on loans paid through compensation, among others.

Santamarina + Steta experts are at your disposal to explain the implications of this jurisprudence and advise you on how to avoid possible contingencies with the authorities.