The enactment of the Provisional Measure n. 899/2019 represents an evolution and acknowledgment by the Brazilian Public Administration that the collection of tax and other governmental debts should be performed in an efficient and realistic way, with optimization of public resources applied to this end under the economic and financial context involving the debtor. The adoption of tax settlements implements a new collection tax policy, similar to the US Offer in Compromise, with the aim of abandoning successive special tax installment agreements, which benefit not only taxpayers under financial distress, but also those that do not need favorable conditions to fulfill their tax liabilities.
For tax credits classified as non-recoverable or of difficult collection – which exceeded R$1 trillion at the end of 2018, MP 899/2019 provides the possibility of debtors entering into tax settlements, which conditions involve grant of discounts (50% of the total in reduction of ordinary fines and interest), longer terms for payment and/or substitution of collaterals. In this scenario, the tax debt may be equalized to the economic and financial reality of the debtor which, in case of non-compliance of the tax settlement, will be subject to a liquidation request by the Federal Union in a bankruptcy proceeding.
Up to today, the tax debt of companies in judicial restructuring has not been object of a realistic regulation allowing proper equalizing. Tax enforcement actions are not often effective, with judicial decisions that avoid auctions of assets considered essential to the indebted taxpayer. Tax settlements as introduced are an interesting way to address this subject, although it should not be considered an impediment to the introduction of a new tax installment agreement more beneficial to companies in judicial restructuring, since the one currently provided by Law n. 10522/2002 is not capable of providing sufficient financial relief.
Moreover, it is positive the initiative to allow tax settlements for cases of relevant and multiplied tax controversies, which may reduce the current heavy workload of judicial courts.
It should be noted that there are a few aspects of MP 899/2019 which may violate the Federal Constitution and legislation, such as the requirement of waiver of rights for settling, the possibility of tax authorities requesting liquidation of a company since they are not subject to judicial restructurings and/or termination cases which are not provided by law, among others. Occasionally, the law resulting from MP 899/2019 may make clear the possibility of payment in kind with real estate, including in cases of tax settlements with discounts, avoiding conflicts with Law n. 13.259/2016.
It is expected that, if well applied, tax settlements be an important tool for helping Brazilian companies in this complex economic moment, with the respective payment of taxes.
Please find in this link the main aspects of MP 899/2019.