Provisional Measure MP 685/2015 (published in the Official Press – DOU, of 22nd of July, 2015) introduced the PRORELIT program which allows taxpayers to settle federal tax debts accrued prior to June 30th, 2015, excluding tax debts that are subject to tax installment payments.
Applications for participation must be submitted prior to September 30th, 2015. In order to enroll, tax payers must pay at least 43% of their outstanding consolidated tax debt accrued through June 30th, 2015 in cash. The remaining 57% of the debt may be settled with NOLs. The application must also be accompanied by an explicit and irrevocable resignation of the taxpayer’s litigation rights with respect to the settled debt amount.
Apart from the initial 43% down payment, no guarantees or collateral is needed. New tax filing obligation to voluntary disclose certain types of qualified transactions, which would generate tax savings (“DLPAT”) In addition to the PRORELIT program, Provisional Measure MP 685/2015 introduced a potential new tax filing obligation (DLPAT). DLPAT requires Brazilian companies to report transactions carried out in the prior fiscal year that resulted in exclusion, reduction, or deferral of taxes, in the following cases:
If the transaction is challenged, the RFB may hold the taxpayer liable for taxes and interests due on the transaction which be payable within thirty (30) days from notice of the RFB’s challenge. The new tax filing should be filed on a “per transaction” basis. Taxpayers who are non-compliant or that have filings with errors may be treated as fraudulent and subject to heavy penalties.
The deadline for reporting such transactions is September 30th of the year following the calendar year in which the transaction occurred.
DLPAT appears to be an attempt to increase tax revenue in Brazil, significantly increasing pressure on taxpayers. However, it could also be in response to the OECD’s BEPS Action 12 (Mandatory Disclosure Rules), even though Brazil is not a full member of the OECD.
Further regulations are expected regarding both PRORELIT and DLPAT.
It is important to note that the Provisional Measure is effective as Law as from the date of its publication for 60 days and may be extended for an additional 60-day period. The Congress must approve the Provisional Measure within such period (i.e. 120 days after its publication).
Julio C. de Cepeda
Carlos Eduardo Toro
Marcus Vinícius Gonçalves
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