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Covid-19 | Tax Settlement is regulated
Law No. 13,988 (conversion of Provisional Measure No. 899/2019), which regulated the tax settlement at federal level was published on April 14, 2020.
Categories of settlement and their respective characteristics
| Categories | Formalization | Benefits | Other conditions |
| Tax settlements of debts enrolled as active and subject to execution (dívida ativa)
(further regulated by Ordinance No. 9,917/2020) |
Individual proposal by the taxpayer (in case of consolidated debts not greater than BRL 15 million) or Adhesion (as per the public notice) | (i) Discounts on fines, interest and/or legal charges related to debts classified as irrecoverable or difficult to recover, as long as it does not imply a reduction greater than 50% of the total debts to be settled;
(ii) Special terms of payment, including the deferral and moratorium, provided that they do not exceed 84 instalments (with a maximum of 60 instalments for social security contributions); (iii) Offering, substitution or sales of guarantees or constraints; and (iv) Possibility to use credits owned by the taxpayer at federal level for purposes of amortization or payment of the outstanding debt under settlement, provided that those credits were recognized by a final judicial decision. |
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| Tax settlements on litigation (ongoing lawsuits or administrative appeals pending of final decision) involving relevant and widespread legal controversy (which go beyond the subjective interests of the cause) | Adhesion
(as per the public notice) |
(i) Discounts of up to 50% of the total debts to be settled; and
(ii) Special payment terms, which should be limited to 84 monthly instalments. |
(i) Limitations on the debts to be settled according to the status of the tax proceeding or to the period they refer to;
(ii) Compliance by the taxpayer with the understanding of the tax authorities on the validity of the debts; (iii) inability to cover: (iii.1) debts included in prior settlement agreements; (iii.2) debts related to disputes already ruled against National Treasury, with binding effects; or (iii.3) proposal that results, directly or indirectly, in a special or individual tax regime. |
| Tax settlements on administrative litigation of small amounts, involving tax debts or legal controversy issues up to 60 times the official minimum wage, and which are object of administrative or judicial appeals | Adhesion
(as per the public notice) |
(i) Possibility of adoption of alternative dispute resolution methods;
(ii) Discounts of up to 50% of the total debts to be settled; (iii) Special terms of payment, including the deferral and moratorium, provided that they do not exceed 60 instalments; and (iv) Offering, substitution or sales of guarantees or constraints |
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| Extraordinary tax settlements of debts enrolled as active and subject to execution (dívida ativa), due to the effects of the COVID-19 pandemic
(further regulated by Ordinance No. 9,924/2020) |
Adhesion, until June 30, 2020, through the REGULARIZE digital platform: www.regularize.pgfn.gov.br | (i) Down payment of 1% of the total amount of the debts to be settled (or of 2%, in case of debtors with a history of terminated instalment agreements), divided in 3 equal and successive instalments;
(ii) Payment of the remaining amount in equal and successive instalments, being the first one deferred to the last business day of the third consecutive month to the adhesion date, as follows: (ii.1) within 142 months, in minimum instalments of BRL 100.00, in case of individual taxpayers, individual entrepreneurs, small business, educational institutions, social assistance entities (Santa Casa de Misericórdia), cooperative societies and other civil society organizations; (ii.2) within 81 months, in minimum instalments of BRL 500.00, in other cases; and (ii.3) in case of Social Security Contribution debts, within 57 months BRL 500.00, as the case may be. |
Exceptionally, adhesion to the extraordinary settlement does not exclude the possibility of the taxpayer to adhere to other categories of settlement provided by the legislation, besides being allowed to request the sale of pledged assets or assets offered as a guarantee of tax enforcements for purposes of amortization or payment of the outstanding debt settled. |
For all categories above, after acceptance, tax settlements constitute an irrevocable and irreversible confession of tax debts and, if payment is made in instalments, their enforceability is suspended. Debts are extinguished after full compliance of the settlement.
Minimum commitments of taxpayers
Taxpayers are required to agree to the following minimum commitments:
(i) not to use tax settlements in an abusive way, aiming to limit, falsify or harm in any form free competition or free initiative;
(ii) not to use individuals or companies to conceal or disguise the origin or the destination of assets, rights or values, their real interests or the identity of the beneficiaries, harming the National Treasury;
(iii) not to sell or encumber assets or rights without communication of competent tax authorities, when required by law;
(iv) to waive objections or administrative appeals that have as object the debts included in settlement agreements and to waive any claims on which the said appeals are grounded; and
(v) to waive any, current or future, legal arguments that ground judicial actions, individual or collective, related to the debts, by means of a request to terminate of the proceedings.
Termination of tax settlements
The termination of tax settlements may occur on the following cases:
(i) non-compliance of the conditions, clauses or commitments assumed by taxpayers
(ii) notice by tax authorities of any act tending to defraud the execution of tax settlement, even if performed prior to adhesion;
(iii) a bankruptcy liquidation decree or liquidation of the company;
(iv) the evidence of malfeasance, concussion or passive corruption;
(v) the evidence of wilful misconduct, fraud, simulation or essential error regarding the person or object under dispute;
(vi) the occurrence of any other termination cases additionally provided for in the respective tax settlement term; or
(vii) non-compliance with any provisions established by law or under the public notice.
Taxpayers with terminated settlements are prohibited, for a period of 2 years from the termination date, to formalize a new settlement, even in case of different debts.
General limitations
The following debts or benefits shall not be object of settlement agreements, in any of the categories aforementioned: (i) granting of discounts/reduction of penalties of criminal nature; (ii) granting of discounts regarding Simples Nacional and FGTS; and (iii) debts of contumacious debtors.
It is not possible to combine in the tax settlement reductions indicated in a public notice with any others ensured by the legislation, nor is allowed the refund or offset of amounts paid in instalment programs for which the taxpayer has chosen before the conclusion of the respective settlement term.
Our tax practice is available for any clarification required and to assist in respect of the measures above.
