On May 16, 2024, the Brazilian Internal Revenue Service (“Brazilian IRS”) and the Office of Attorney-General of the National Treasury (“PGFN”) jointly published the Public Notice of Transaction for Adhesion in the Tax Litigation of Non-compliance and disseminated Legal Controversy No. 4/2024 (“Public Notice”).
This follows the Brazilian IRS’s recent announcement of a special program to incentivize the voluntary disclosure of federal tax liabilities ascertained as a result of exclusions of incentives and tax benefits related to value-added tax on sales and services (“ICMS”) from the calculation basis of Corporate Income Tax (“IRPJ”) and Social Contribution on Net Profit (“CSLL”), whose said exclusion were carried out in disagreement with Article 30 of Law No. 12,973, of May 13, 2014 (“Law No. 12,973/2014”).1
The tax settlement foreseen in the Public Notice encompasses tax debts enrolled or not in federal overdue tax liabilities , of any amount, including debts with suspended liability pursuant to items II, III, IV, and V of Article 151 of the Brazilian Tax Code and related qualified penalties, existing until May 16, 2024.
The adhesion to tax settlement can be made from May 16, 2024, until June 28, 2024, and implies:
i. irrevocable and irreversible confession of the debts included in the tax settlement;
ii. withdrawal of administrative defenses or appeals filed, in relation to the debts included in the transaction, and waiver of the claims of law on which these defenses are based, in relation to the same debts included in the transaction;
iii. the automatic use of judicial deposits linked to the debts to be settled, in which the payment conditions will apply to the remaining balance.
Pursuant to IN/RFB No. 2,184/2024, the payment conditions for purposes of adhesion to the tax settlement are the following:
i. payment in cash of the consolidated debt, with a reduction of 80%, in up to 12 successive monthly installments; or
ii. payment in cash of, at least, 5% of the value of the consolidated debt, without reduction, in up to 5 successive monthly installments and the remaining amount paid:
a. in up to 60 monthly and successive installments, with a reduction of 50% of the remaining amount; or
b. in up to 84 monthly and successive installments, with a reduction of 35% of the remaining amount.
The value of each installment will be increased by the Selic Rate, accumulated monthly, calculated from the month following consolidation until the month prior to payment, and 1% in relation to the month in which the payment is being made, noting that the value of the installment cannot be less than BRL 500,00.
In addition, we highlight that the Public Notice prevents:
i. the accumulation of discounts or reductions granted under the terms of the Public Notice with any other benefits ensured by the government legislation relating to the tax debts included in the tax settlement; and
ii. the withdrawal of guarantees before the agreement is fully settled.
Finally, the adhesion to the tax settlement of debts enrolled in overdue tax liabilities shall be made at the REGULARIZE website, while the adhesion of existing debts with the Brazilian IRS must be carried out electronically at the Virtual Service Center - e-CAC.
1 https://www.tauilchequer.com.br/en/insights/publications/2024/04/brazilian-irs-program-incentivizes-disclosure-of-certain-tax-liabilities
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