Brazil’s Revenue Service Issues New Rules for Debt Payment Program

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By Ed Taylor

Brazilian tax attorneys reacted with surprise and concern to an unexpected policy alteration by the country’s federal revenue service.

On Aug. 21, the service issued Interpretive Declarative Act No. 5, which prohibits tax debts companies have tried to offset with tax credits from being included in the government’s new program for the payment of tax debts. The Special Program for Tax Regularization was created through a decree issued May 31.

According to the new policy, any debts that were compensated for wholly or partially through tax credits prior to May 31 can’t enter the program. This also includes requests for compensation that were filed by companies but weren’t ruled on by the revenue service prior to May 31.

For attorney Guilherme Tostes of the law firm Levy & Salomao, the declarative act conflicts with the May 31 decree, Provisional Measure 783. Tostes told Bloomberg BNA via email Aug. 22 that the decree allows companies to drop their compensation requests and include these debts in the program. The decree, he stated, also permits a company whose original compensation request was only partially accepted by the revenue service to include its entire debt in the program.

“But now the revenue service is saying that this can’t happen,” Tostes said.

New Compensation

In its statement, the revenue service said “if a taxpayer sought compensation for debts and then tried to include compensated debts in the program,” this debt “will not be considered.” It added that companies should request a new compensation outside of the tax debt program.

Attorney Daniella Zagari of the firm Machado Meyer questioned the legality of the declarative act, stating that the limitation now imposed by the revenue service isn’t contained in the original decree.

“This is because even after seeking compensation, the taxpayer can still end up with a debt on its hands because the revenue service may not grant the full compensation,” she said via email Aug. 22.

Both Zagari and Tostes said companies affected by the new policy should take legal action to force the revenue service to include their contested debts in the program.

The decree creating the program, however, has yet to be approved by Brazil’s congress where, in the government’s eyes, it has been significantly altered.

The program was expected to produce $4.2 billion in revenue this year, but a congressional committee has approved discounts in fines and interest charges of between 85 percent and 99 percent. This lowered the projected revenue from the program to $160 million.

Finance Minister Henrique Meirelles is attempting to restore the original text and told reporters Aug. 21 that negotiations are underway with congressional leaders on a consensus proposal.

“We’ve already sent a few proposals, but no agreement has been reached,” he said.

The original decree gave companies until Aug. 31 to sign up for the program, which promised maximum discounts of 90 percent for interest and 50 percent for fines in cases where companies made a 20 percent initial payment and liquidated their debts by the end of 2017. The government now wants to extend the deadline until Oct. 31.

To contact the reporter on this story: Ed Taylor in Rio de Janeiro at

To contact the editor responsible for this story: Penny Sukhraj at

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