New legislation facilitates the negotiation of debts with the National Treasury

Companies in financial crisis may use tax losses to settle debts with the tax authorities.

Taxpayers and the National Treasury will have more opportunities to reach agreements through tax transactions. Published yesterday, Law No. 14,375 expands discounts and payment deadlines. It also allows the negotiation of all debts discussed in the administrative sphere – currently, there are restrictions regarding debts with the Federal Revenue Service.

Last year, based on the old rules, R$ 31.7 billion was recovered for public coffers – a value 29% higher than that achieved in the previous year.

The transaction was established in February 2020 through Law No. 13,988. The measure was a landmark because the National Tax Code provided for the transaction, but it lacked regulation by law. Since then, the tax authorities have been permitted to sit down and negotiate with debtors, regardless of the amount of the debt.

Under the previous law, the discount limit was 50% on interest and penalties. The ceiling has been increased to 65%. The installment payment limit has also been extended, from 84 months to 120 months. It is also possible for the transaction to be initiated at the taxpayer's own request.

Tax losses and negative CSLL (Social Contribution on Net Income) tax bases can be used to settle tax debts up to a limit of 70% of the remaining amount after discounts are applied. Although authorization from the Federal Revenue Service or the Attorney General's Office for the National Treasury (PGFN) is required, tax experts are celebrating this opportunity.

A court-ordered payment (precatório) or credit right with a final and unappealable judgment – even if the payment order has not yet been issued – may also be used to amortize the principal tax debt, fines, and interest. Tax lawyer André Oliveira, partner at CB Advogados, projects that taxpayers could request a review of non-individual transactions already signed to allow for the use of court-ordered payments under the terms of the new law.

What was left out of the new law, after its enactment, is the possibility of applying the discount to the principal debt. Even so, the progress was significant, according to lawyer Priscila Faricelli, partner at D. Advogados. "Law 13.988 had come in a very timid way because there was a lot of resistance to the concept," says the tax lawyer.

Some taxpayers were expecting the so-called "Covid Refinancing Program," which would be a special installment plan for tax debts. Priscila points out that, unlike the Refinancing Program, this transaction involves an analysis of the recoverability of the taxpayer's credit. According to her, there will be monitoring by the Attorney General's office, which will block, at the time of the agreement, taxpayers who are likely to evade tax payments in order to constantly try to take advantage of benefits.

According to the lawyer, the transaction has allowed for the construction of a channel of dialogue between the tax authorities and taxpayers that has been expected for years. Therefore, she considers the changes relevant, even though the discount on the principal debt was vetoed when the legislation was enacted.

Until the new regulation, only a portion of debts not registered as delinquent could be negotiated with the Attorney General's Office of the National Treasury (PGFN). These were debts considered to be of small value or those disputed through tax litigation arguments. Only two arguments were open for agreements: those related to profit-sharing programs (PLR) and goodwill. Now, debts not registered as delinquent can be negotiated more broadly.

The law also clarifies that discounts granted on the collection of credits from the Federal Government and autonomous entities will not be subject to Income Tax, CSLL (Social Contribution on Net Profit), PIS (Social Integration Program), and Cofins (Contribution to Social Security Financing). "These are specific changes that improve the transaction," according to Fábio Calcini, partner at the law firm BSM Advocacia. The lawyer also highlights the use of tax losses by companies in financial crisis.

The sectors that will benefit most are companies in judicial reorganization or about to enter reorganization, because they have low ratings and greater discounts, in addition to likely accumulated losses, according to Matheus Bueno, partner at BT Lawyers. "Any taxpayer who accumulated liabilities during the pandemic and is still in the CARF [Administrative Council of Tax Appeals] may have an advantage," he states.

The regulation could lead the Attorney General's Office for the National Treasury (PGFN) and the Federal Revenue Service to modify the public notice that opened the transaction for judicial and administrative discussions regarding goodwill, according to Julio Janolio, partner at VR Advogados. "In practice, there will be a loss of interest on the part of taxpayers, since the benefits brought by the law are better than those foreseen in the currently valid goodwill notice," he stated.

Adapted from an article published by Valor Econômico .