Tax News: Tax Regularization Payment Program

Tax News: Tax Regularization Payment Program

Brazilian acronym "PRT"

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Tax News: Tax Regularization Payment Program

The Federal Executive Branch issued Provisional Measure 766 on January 4, 2017 (“MP 766”), and published on the following day, with the force of law, which introduced the Tax Regularization Payment Program (“PRT”) with the purpose of giving Brazilian taxpayers an opportunity to settle federal tax debts.

Benefits

The Payment Program does not provide for the amnesty of penalties (such as fine and interest), but it rather consists on the possibility of settling federal tax debts in installments according to different and special conditions. PRT is focused on debts that are under administrative or judicial discussion (active or passive lawsuits against the National Treasury Attorney's Office (Brazilian acronym “PGFN”) and debts challenged by Brazilian Internal Revenue Service (Brazilian acronym “RFB”)). In the latter case, the Program allows the partial settlement of the debts with the use of tax credits, including tax losses carry forward.

Eligible Debts

  • Tax or non-tax related.
  • Past due by November 30, 2016.
  • Due by and charged to the taxable person (in the condition of the tax agent collector), as taxpayer or liable party.
  • Not fully paid in previous payment programs.
  • Challenged under administrative or judicial proceedings.
  • Arising from infraction notices issued after the PRT release.

Settlement Options

Options Description
1 payment of, at least, 20% (twenty percent) of the consolidated debt value in kind and at sight and settlement of the remainder with the use of tax losses carry forward or tax credits related to other federal taxes administered by RFB;
2 payment of, at least, 24% (twenty-four percent) of the consolidated debt value in kind and in 24 (twenty-four) monthly and successive installments and settlement of the remainder with the use of tax losses carry forward or tax credits related to other federal taxes administered by RFB;
3 payment of 20% (twenty percent) of the amount of the consolidated debt value in kind and at sight and the settlement of the remainder in up to 96 (ninety-six) monthly and successive installments;
4

payment of the consolidated debt in up to 120 (one hundred and twenty) monthly and successive installments, calculated in order to observe the following minimum percentages, applied to the value of the consolidated debt:

a) Installments #1 through #12 - 0,5%;

b) Installments #13 through #24 - 0,6%;

c) Installments #25 through #36 - 0.7%; and

d) From Installment #37 onwards - percentage corresponding to the remaining balance, in up to 84 (eighty-four) monthly and successive installments.

payment of, at least, 20% (twenty percent) of the consolidated debt value in kind and at sight and settlement of the remainder with the use of tax losses carry forward or tax credits related to other federal taxes administered by RFB;

payment of, at least, 20% (twenty percent) of the consolidated debt value in kind and at sight and settlement of the remainder with the use of tax losses carry forward or tax credits related to other federal taxes administered by RFB;

payment of, at least, 20% (twenty percent) of the consolidated debt value in kind and at sight and settlement of the remainder with the use of tax losses carry forward or tax credits related to other federal taxes administered by RFB;

payment of 20% (twenty percent) of the amount of the consolidated debt value in kind and at sight and the settlement of the remainder in up to 96 (ninety-six) monthly and successive installments;

payment of 20% (twenty percent) of the amount of the consolidated debt value in kind and at sight and the settlement of the remainder in up to 96 (ninety-six) monthly and successive installments;

payment of the consolidated debt in up to 120 (one hundred and twenty) monthly and successive installments, calculated in order to observe the following minimum percentages, applied to the value of the consolidated debt:

 

a) Installments #1 through #12 - 0,5%;

 

b) Installments #13 through #24 - 0,6%;

 

c) Installments #25 through #36 - 0.7%; and

 

d) From Installment #37 onwards - percentage corresponding to the remaining balance, in up to 84 (eighty-four) monthly and successive installments.

payment of the consolidated debt in up to 120 (one hundred and twenty) monthly and successive installments, calculated in order to observe the following minimum percentages, applied to the value of the consolidated debt:

 

a) Installments #1 through #12 - 0,5%;

 

b) Installments #13 through #24 - 0,6%;

 

c) Installments #25 through #36 - 0.7%; and

 

d) From Installment #37 onwards - percentage corresponding to the remaining balance, in up to 84 (eighty-four) monthly and successive installments.

Debts due to PGFN

Regarding debts due to PGFN, the alternatives provided by MP 766 correspond to Options 3 and 4 above. For these debts, the use of tax credits (such as tax losses carry forward) to offset the debts should not be possible.

Enrollment Deadline

120 (one hundred and twenty) days counted from the further normative regulation to be issued by PGFN and RFB, which should be enacted until 30 (thirty) days after the issuance of MP 766.

Enrollment Requirements and Effects

CONFESSION - Irrevocable and irreversible confession of debts by the taxable person as the taxpayer itself or a tax agent collector;

WITHDRAWAL OF ADMINISTRATIVE AND JUDICIAL DISCUSSIONS - As an enrollment requirement to the PRT, taxpayers must first withdraw their objections or administrative appeals and legal actions connected to the debts to be settled under the program (together with the waiver of any claims of right attached to those debts);

APPLICATION - Adhesion will take place upon submission of Application within the above-mentioned enrollment deadline;

DOWNPAYMENT - The granting of the application for adhesion to the PRT shall be conditional on the payment in kind of the amount due or the first installment, which shall occur until the last working day of the month when the requirement would have been filed;

TOTAL ALLOCATION - There is a duty to pay, on a regular basis, the installments of debts consolidated in the PRT, as well as debts due after November 30, 2016, registered or not in Federal Treasury Active Collection Files, under risk of being excluded from the PRT;

FUTURE MIGRATION FORFEITURE - MP 766 prohibits debts enrolled in the PRT to be included in any other form of subsequent payment installment program, except for ordinary installment program (under normal conditions already provided for in the legislation);

COMPLIANCE WITH THE FGTS - Failure to comply with the Government Severance Indemnity Fund for employees (FGTS) on a regular basis implies exclusion from the PRT.

Tax Losses Carry Forward

Tax losses carry forward incurred until December 31, 2015, and reported / disclosed until June 30, 2016, may be used as tax credits to be offset against debts. The tax losses carry forward that may be used refer to the ones incurred (i) by the taxpayer itself; (ii) by its parent company(ies) and/or its directly or indirectly controlled companies; or (iii) by companies that are directly or indirectly controlled by the same company, on December 31, 2015, domiciled in the country, provided they remain under the corporate structure until the date of the option for discharge.

Debt Consolidation Date and Installment Amount (Minimum Value and Update)

The debt to be enrolled in the PRT will be consolidated on the date of the PRT enrollment application and will be divided by the number of applied installments.

During the period for which the debt is not consolidated, the taxpayer must calculate and collect the amount due on sight or the amount equivalent to the amount of the debts object of the PRT divided by the number of installments agreed under the Program.

In case of debt due by legal entities, the minimum installment amount should be R$ 1,000.00 (one thousand reais).

Each and any monthly installment, at the time of payment, will be increased by interest equivalent to the referential rate of the Brazilian Treasury Short Term Interest Rates – SELIC. SELIC will be applied in a simple interest arrangement, monthly accumulated, as from the consolidation subsequent month until the installment payment previous month, plus one percent in relation to the due date month.

Comments and Observations related to Withdrawal of Administrative and Judicial Discussions

In case of judicial proceedings, an application or request for dismissal of the case with resolution of the merits should be filed before the court in order to be ratified by a judge;

Partial withdrawal should only be considered if it is possible to distinguish the debt being withdrawn from the debts being discussed;

Proof of the waiver request (lawsuits or administrative objections and appeals) must be submitted to RFB until the last day of the deadline for applying for the PRT.

Withdrawal and waiver do not relieve the author of the lawsuit from the payment of legal fees.

Guarantee Deposits

Guarantee Deposits connected to debts to be paid on sight or in installments will automatically be converted into definitive payments or as income to the Union.

The remaining balance of guarantee deposits, not absorbed by debits due to the RFB may only be withdrawn after the formal acceptance of the tax losses carry forward or other tax credits used to settle the debt.

Preference Order in the Use of Credits

Tax credits allocated by taxpayer to amortize PRT debts should first be used to offset debts not guaranteed by judicial deposits.

PRT Breach

It will be excluded from the payment program and, consequently, will be subject to the immediate active collection of all debts confessed and not yet paid, as well as subject to the automatic execution of the guarantee provided, the taxpayer who:

  • Does not pay three consecutive installments or six non consecutive installments.
  • Does not pay one installment, even if all others are paid.
  • PGFN or RFB identifies any act tending to the patrimonial depletion of the taxpayer as a way to defraud the fulfillment of the installment payment.
  • Has the decree of bankruptcy or extinction, by liquidation, of the legal entity opting for the PRT.
  • Is subject to the issuance of a fiscal precautionary measure.
  • Has the declaration of unfitness of the registration in the National Registry of Legal Entity (CNPJ).
  • Does not comply with its obligations with the FGTS.
  • Does not pay the federal tax debts due after November 30, 2016, whether or not registered as Active Debt of the Union.

Click here to access the Portuguese version.

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