Preliminary Injunction Recognizes Right to PIS and COFINS Credits on Mineral Water Purchases

Brazil’s tax landscape underwent significant changes with the enactment of Complementary Law No. 224/2025. As part of a broader fiscal adjustment effort, the law reduced several tax benefits by 10%. With respect to the beverage sector, it changed the tax treatment of mineral water, which had previously been subject to a zero rate and is now taxed at rates of 0.165% for PIS and 0.76% for COFINS.

The most controversial aspect lies in Article 4, Paragraph 7, of Complementary Law No. 224/2025, which expressly prohibits the use of tax credits related to such acquisitions. In practice, the Federal Government began requiring payment of the taxes on sales while preventing taxpayers from offsetting amounts paid at previous stages of the production chain. This approach undermines the logic of the non-cumulative tax regime established under Article 195, Paragraph 12, of the Brazilian Constitution and creates a significant burden for taxpayers.

Recently, the matter was brought before the 9th Federal Civil Court of São Paulo, which granted a preliminary injunction in Writ of Mandamus No. 5011740-67.2026.4.03.6100, filed by SPAL Indústria Brasileira de Bebidas S/A (Coca-Cola’s representative in Brazil), to ensure the taxpayer’s right to claim PIS and COFINS credits arising from mineral water purchases or, alternatively, to suspend the enforceability of the tax increase resulting from the new legislation.

The key grounds supporting the injunction were:

Violation of the Non-Cumulative Principle: The court held that, if taxation applies to the output transaction, the right to claim credits on the input transaction is a constitutional requirement to prevent double taxation.

Lack of Effectiveness and Transparency: The decision highlighted the absence of publication of the tax expenditure report attached to the 2026 Annual Budget Law (LOA), which constitutes a failure to comply with formal fiscal transparency requirements and creates legal uncertainty.

Equal Treatment: The court recognized that the arbitrary prohibition of tax credits distorts free competition and unjustifiably burdens a specific sector.

Although this interpretation has not yet been consolidated by the higher courts, the decision represents a highly relevant precedent for companies involved in the manufacture, distribution, and sale of beverages, as well as for industries that use mineral water as an essential input in their production processes. The suspension of the tax obligation or the recognition of PIS and COFINS credits in these transactions may enhance product and business competitiveness, provide direct cash flow relief, and potentially support the recovery of amounts paid under Complementary Law No. 224/2025 without the corresponding credit entitlement.