Tax Treatment of Reimbursement of Expenses in the Context of Service Rendering Agreements

Abstract

The tax treatment applicable to reimbursement of expenses in the context of the provision of services has been a controversial topic in view of the absence of clear legal criteria to distinguish the price of the services from the amounts that are paid by the service provider on behalf of the client. Based on accounting concepts, this article seeks to distinguish “incomes” from “revenues”, and “expenses” from “costs”, in order to conclude that such distinction is intrinsically linked the (i) to the original cause of the service agreement; (ii) the terms contained in said agreement; and (iii) the lack of nexus between the expenses incurred in relation to the service obligations. The matter has already been analyzed by the Administrative Council of Tax Appeals – Carf, and, recently, the Ruling No. 9303-013.281, which result was unfavorable to the taxpayers, confirms that there is no adoption of a uniform line of interpretation.