Brazilian Federal Revenue Service updates installment payment rules for companies undergoing judicial reorganization.

The Brazilian Federal Revenue Service has increased the payment period for tax debts for businesses and companies facing bankruptcy from 84 to 120 months. This measure was mandated by Law No. 14.112/2020, which updates the legislation regarding judicial reorganization, extrajudicial reorganization, and bankruptcy.

Furthermore, the tax regulation also reduced the initial value of installments through changes in the calculation system, and established a new installment payment option that allows for the inclusion of taxes subject to withholding at source and the Tax on Financial Operations (IOF) withheld but not paid to the National Treasury.

The new law, in addition to amending Article 17 of Normative Instruction No. 1,891/2019, also modified Article Five, aiming to readjust the procedure for registering social security contribution debts in the Confessed Debt Assessment (LDC).

According to the government, the measures aim to make it easier for entrepreneurs and business entities undergoing judicial reorganization to access installment payment plans for tax debts.

Registration must be done by submitting an LDC application, according to the model in Annex IV, included in Normative Instruction No. 1,891/2019.

New Law on Judicial Reorganization and Bankruptcy

The text presents new information and is very important for Brazilian businesses, especially during this pandemic. This economic scenario caused by the coronavirus has increased the need for affected companies to have better recovery tools. Therefore, the project also aims to modernize the recovery system. Without changes, we cannot make this system more transparent and improve credit recovery. Thus, improvements in the business recovery system positively impact the economy.

It allows the company to negotiate with creditors before entering judicial reorganization and to offer additional guarantees to obtain financing.

Another change brought about by the new Bankruptcy Law is the increase in the repayment period for debts to the Federal Government from seven to ten years. The government also regulated loans taken out by these companies, since new financing will have priority over debts incurred during the recovery process. The new law also allows the personal assets of debtors to be used as collateral, provided there is judicial authorization.

This law had been highly anticipated and discussed by legal experts, businesspeople, and politicians since 2016, but it wasn't until 2020 that we saw it become a reality.

Source: Contabeis.com