Are McDonald’s cones and sundaes ice cream? Carf decides not to do it

BRASÍLIA — It looks like ice cream, tastes like ice cream and is cold like ice cream, but it’s… a milk drink. At least that is what the 1st College of the 1st Chamber of the 3rd Section of Parliament understood. Administrative Council for Tax Appeals (Carf). In a strategic victory for Arcos Dourados, operator of the McDonald’s In Brazil, the court ruled, by 5 votes to 1, that the chain’s famous cones, sundaes and milkshakes did not fall into the category of “edible ice cream.”

This month’s decision allows the company to benefit from the zero PIS/Cofins rate, a tax advantage reserved for milk drinks, canceling a federal revenue contribution that amounted to 324 million reais.

The winning thesis: “High viscosity liquid”

The dispute revolved around the physics and chemistry of food. The Federal Revenue Inspectorate claimed that the products were ice cream from the softsubject to normal taxation, and that calling them drinks would be an “extreme technicality” to avoid the tax, since the product is not liquid in the eyes of the common consumer.

However, McDonald’s defense prevailed with technical arguments taken from expert reports. The thesis retained by the advisors was based on two main pillars:

1. Unfrozen: To be considered ice cream (edible ice cream) under regulatory legislation, the product must be stored or served at temperatures at or below -8°C or -12°C. The company has proven that its desserts are served to consumers between -4°C and -6°C. Technically, they would just be “cold”.
2. It is a viscous liquid: Laboratory reports Food intelligence and the National Institute of Technology (INT) presented in the process classified the mass of the cone as a “high viscosity liquid” or a “creamy paste”. The argument is that the restaurant’s machine only cools the milk drink purchased from suppliers (like Vigor and Polenghi), without changing its chemical composition.

The impact on the milkshake

The ruling also covered McShake. The recipe asked whether the final product retained the characteristics of a milk drink after mixing syrups and flavorings.

The data presented by the company, however, showed that the milkshake maintains a dairy base (milk and whey) well above the 51% required by Normative Instruction No. 16/2005 of the Ministry of Agriculture to be considered a drink. In the case of the Flakes flavor, for example, the milk base reaches 73.1%; in Chocolate, 64.3%.

Disagreement between advisors

The judgment was not unanimous. The dissenting vote, from councilor Ramon Silva Cunha, argued that the degree of viscosity is decisive for the classification of the product and that accepting the company’s thesis distorts the concept of ice cream. For Revenue, the legislation must be interpreted literally, and the appearance and consistency of the product (solid/pasty) must take precedence over the technical definition of temperature.

With this victory, McDonald’s validates its tax strategy, confirming that, fiscally, buying a cone is equivalent to buying yogurt or fermented milk.