Brazil’s Law 14.357/2022 – which regulates changes in the requirements and conditions inherent to transactions involving disputes between the government and debtors around taxes and other matters – was published on June 22. The main changes are the following:
- Transactions may include discounts of up to 65% (not only 50%, as currently foreseen) on fines, interest (not only on late payments, as currently foreseen) and legal charges which are considered irrecoverable or difficult to recover;
- Taxpayers may use credits – of their own or belonging to affiliated or controlled companies – from tax losses and from Brazil’s social contribution on net income (Contribuição Social sobre o Lucro Líquido/CSLL) negative tax base up to 70% of the remaining balance after discounts, if there are any;
- Precatory or credit rights from a final judgment may be used for amortization of main tax debts, fines and interest;
- Debtors may individually initiate a proposal for a transaction to be carried out in tax administrative litigation, in addition to the adhesion option, as currently foreseen;
- Transactions may include the credit settlement period of up to 120 months (not 84 months, as currently foreseen);
- Material impossibility by debtors to provide guarantees or additional guarantees to those already established in legal proceedings will no longer be an obstacle to transactions;
- Discounts granted in transactions concerning collection of government and public institution credits will not be considered in calculating corporate income tax (Imposto de Renda Pessoa Jurídica/IRPJ), CSLL, social integration program taxes (Programa de Integração Social/PIS) and contribution to social security financing (Contribuição para Financiamento da Seguridade Social/Cofins);
- Benefits granted in previous installment programs that are still in force – considered and consolidated for the purposes of transactions – will be maintained; transactions will be limited to values referring to the remaining balance of the respective installment, considering installments due and settled in the respective proportion of the amount due, provided that the taxpayer is in good standing in the program and, when applicable, is subject to administrative or judicial litigation; accumulation of reductions between the transaction and the respective installment programs is prohibited;
- The transaction-by-adherence regime in small-value tax litigation is extended to non-tax debts managed by Brazil's Attorney General of the National Treasury (Procuradoria-Geral da Fazenda Nacional/PGFN), to its national worker’s guarantee fund (Fundo de Garantia do Tempo de Serviço/FGTS) credits and, where applicable, to federal agency and public foundation debts.
