I – FEDERAL COURT AUTHORIZES COMPANY TO POSTPONE PAYMENT OF FEDERAL TAXES
The Federal Justice of the Federal District handed down a decision today (03/26/2020), authorizing a company to postpone the collection of federal taxes (namely: IRPJ, CSLL, PIS, and COFINS), in view of the financial loss caused by the pandemic resulting from the coronavirus (COVID-19).
According to the decision, if this postponement were not granted, the company’s existence would be jeopardized and, consequently, the employment of five thousand workers.
It has been recognized that Brazil is going through an exceptional economic situation, due to the mandatory horizontal quarantine, so that companies are closed and unable to generate revenue.
In this way, the Judge allows the postponement of the collection of federal taxes, considering that the financial paralysis was not caused by the company, but by nationwide sanitary reasons.
The judge only pondered, in his decision, that, in return, the company must prove monthly the maintenance of the five thousand jobs, under penalty of revoking the authorization of deferment of the payment of federal taxes, without prejudice to the imposition of other applicable sanctions.
On the other hand, the magistrate determined that the Plaintiff company must amend its initial petition to include all the entities with which it maintains a regular tax relationship (Federal District/States/Municipalities) in the passive pole of the action, because, in his opinion one cannot attribute to the Union alone the burden of bearing the practical effects of actions that, in most cases, it is the States/DF and Municipalities that are putting into practice the state of public calamity, so that the decision to postpone payment may also cover state and municipal taxes.
It is worth noting that the position taken by the Federal Court of the Federal District is important, as it is a favorable precedent for taxpayers who find it difficult to pay their taxes and need to postpone payment.
II – PGFN EXTENDS THE DEADLINE FOR ADHESION TO THE EXTRAORDINARY TRANSACTION
The Attorney General of the National Treasury (PGFN), in view of the approval of Provisional Measure 899/2019, on 03.24.2020, by the National Congress, has extended the term of the extraordinary transaction agreement by accession, until the text is sanctioned by the President of the Republic.
As for the benefits, those provided by PGFN Administrative Rule no. 7820/2020 remain valid, namely:
- down payment referring to 1% of the total value of the debt transacted, in installments of up to 03 (three) months (March, April, and May);
- installment plan for the remainder in up to 81 (eighty-one) months;
- deferment of the payment of the first installment of the installment plan referred to in the previous item until the last business day of June 2020.
In the case of social contributions, the period will be up to 60 (sixty) months for payment.
III – SÃO PAULO CITY HALL INSTITUTES A DEBT TRANSACTION PROGRAM
The Municipality of São Paulo instituted the de-judicialization policy in the scope of the Direct and Indirect Municipal Public Administration through Law 17,324/2020, with the following objectives: (i) reduction of litigiousness; (ii) to encourage the appropriate settlement of disputes; (iii) to promote, whenever possible, the consensual resolution of conflicts; and (iv) improve the management of the volume of administrative and judicial demands.
This law provides the following instruments to solve legal controversies: (i) agreement; (ii) mediation and arbitration and (iii) tax transaction.
Regarding the agreement, the legislation foresees that tax and non-tax debts that do not exceed the amount of R$ 510,000.00 (five hundred and ten thousand reais) can be object of the agreement.
Furthermore, adhesion to the agreement implies an irrevocable confession of debt and the waiver of the right on which the defense or appeal filed in the administrative or judicial sphere is based.
In case of default on any installment, after 60 (sixty) days, the execution process will be instigated or will continue for the originally consolidated balance, duly corrected, subtracting the amounts already paid.
Furthermore, in relation to the tax transaction, the Municipality of São Paulo can use it for debts related to the tax debt, whose registration, collection, or representation is the responsibility of the Attorney General’s Office of the Municipality.
The tax transaction can take the following forms:
- individual proposal or by adhesion in the collection of the active debt;
- adhesion in other cases of judicial or administrative tax litigation; and
- adhesion in low value administrative tax litigation.
Acceptance of the transaction constitutes an irrevocable and irreversible confession of the credits covered by it.
Once the tax transaction is adhered to, and if there is an administrative or judicial dispute, the taxpayer must give up any administrative challenges and/or appeals, as well as any judicial measures, and renounce any allegations of law. In lawsuits, the taxpayer must file a request for the extinction of the lawsuit, with resolution of the merits, under the terms of article 487, III, of the Code of Civil Procedure.
It is important to emphasize that the tax credit will only be suspended when the transaction proposal is accepted and ratified.
In relation to the transaction by adhesion, the legislation foresees that notices will be published that specify the requirements to be met, the reductions or concessions offered, the deadlines and forms of payment allowed.
Finally, it is important to point out that the Executive Branch will regulate, within 180 days, the tax transaction modalities proposed by Law 17,324/2020.
We remain at your disposal for any clarifications.
DDSA Tax Team