In April 2020, the 13.988 Law, which introduced in the Brazilian legal system the tax transaction institute, an alternative instrument that aims to resolve tax debt litigation. Although the mechanism has been foreseen since the creation of the National Tax Code, in 1966, it has been dormant for more than half a century and only became part of taxpayers' list of options after the law was enacted last year.
In general terms, the implementation of the tax transaction opened a new chapter in the relationship between tax authorities and taxpayers, favoring the negotiation of tax debts instead of perpetual disputes in the Judiciary. In addition, the instrument also tries to overcome the recurring needs of publishing new Refis programs — considered unfair from the point of view of tax justice — as well as allowing companies in a situation of judicial reorganization to be able to regularize their tax liabilities.
Just over a year after the institute came into force, lawyers consulted by the JOT point out that the results obtained show a tendency to consolidate the instrument as the main means of resolving tax liabilities in Brazil. According to data from the PGFN, up to the first half of July, within the scope of the active debt collection, debts that reached the amount of R$ 112 billion were negotiated, in more than 350 thousand signed agreements. Regarding individual transactions, agreements totaling more than R$ 6 billion were signed.
“Taxpayers have been interested not only in the modalities of notices, but also in individual transactions. For liabilities that are difficult to reconcile, the instrument has been sought. On the other hand, for the PGFN it has also been beneficial, because whether you like it or not, it is a way to recover credits with no prospects”, says tax expert Diego Diniz, partner at Daniel & Diniz Advogados.
One of the main reasons supporting the analysis that the instrument has also been positive for the PGFN involves the fact that, at least in this first year in force, the tax transaction focused on those credits classified by the tax authorities as irrecoverable or difficult to recover. Attorney's calculations, for example, show that the twenty Refis programs opened in the country since 2001 totaled R$ 240 billion in recovered fiscal liabilities. However, of this total, R$ 190 billion were credits classified as recoverable.
“The first impression when we talk about transactions is to compare them with the Refi programs. But here the focus is different. I'm not giving amnesty to anyone to fund themselves with government money. I am looking at situations that either the government does not expect to recover or it is a very individual situation for taxpayers”, says Andréa Mascitto, partner at Pinheiro Neto Advogados and professor of tax law at FGV SP.
From the perspective of Ricardo Soriano de Alencar, attorney general at the National Treasury, the reception of the tax transaction by civil society has been positive. "Not only because of the number of subscribers, which is substantial, or the resolution of tax credits with the PGFN and the Federal Revenue, but, in a special way, because the transaction opened a new phase in the relationship between the tax authorities and taxpayers", he assesses.
Alencar also adds that the strategies to further popularize the transaction institute in the country have caught the attention of the PGFN. “The transaction is an important tool for taxpayers, and it is sensible for everyone to be aware of its existence and its possibilities. Today, we have made an effort to publicize our actions, and we are attentive to the needs that are detected in our contact with society”, he says.
Because the tax transaction is increasingly present in the daily lives of Brazilian taxpayers and, in fact, is a more productive option to discuss tax debts, the lawyers heard by the JOT point out that some adjustments are needed for its use to grow and become more democratic.
Currently, there are three types of transaction that the legislation authorizes: (i) membership transaction for debts already registered in active debt with a value of less than R$15 million or credits arising from litigation of small value; (ii) individual transaction, for companies with debts with the tax authorities in excess of R$15 million; (iii) litigation transaction, for credits arising from relevant and widespread legal controversy, preferably that are not objects of general or repetitive repercussions.
One of the main criticisms of the institute involves the rule that, for companies to adhere to the individual transaction, the tax debt must exceed R$15 million. This base value was established by Ordinance PGFN 9.917/2020, which disciplined the rules for the tax transaction. If the sum of the debt does not reach this amount, it is only possible to opt for the transaction by adhesion.
“What bothers me most about the transaction today is the issue of the 'common grave' of adhesion being basically the only alternative for most Brazilian taxpayers. Large debtors today are, as a rule, companies that are already consolidated in the market and that have the financial capacity to pay. Why can't a medium-sized company or a micro company sit down with the attorney, either through a lawyer or through their own means, to negotiate?” asks Mariana Cardoso Martins, partner of CMartins Advogados and co-founder of the Brazilian Institute of Arbitration and Tax Transaction.
This issue is already being disputed by the Judiciary. In May this year, the 9th Civil Court of the Judiciary Section of São Paulo granted an injunction filed by the Brazilian Taxpayers Association, removing article 4, paragraph 1, of the PGFN ordinance 9.917/2020 and allowing the execution of the individual transaction at levels lower than the established R$ 15 million. In the opinion of judge Cristiane Farias Rodrigues Dos Santos, the rule would have extrapolated the effects of Law No. 13.988/2020, creating a limitation that did not exist, which would end up violating the principle of legality.
As defended by the PGFN in the case records, the allegation should not be accepted, since the Federal Government, in "judgment of opportunity and convenience, may enter into a transaction in any of the modalities provided for in the law, whenever, with good reason, it understands that the measure serves the public interest”. Thus, the tax authorities pointed out, the financial limitation imposed by the ordinance does not offend any legal principle.
Another point of attention with regard to tax transaction rules, according to Mariana Martins, from CMartins Advogados, involves the impossibility of using tax losses or negative calculation bases to settle part of the debts. “The transaction comes to replace once and for all the need for Refills, as long as it aligns interests. In the case of installment programs, it is possible to use tax loss and negative tax base. That is why it is important for us to study opening this possibility for the transaction as well”, he says.
In the understanding of Halley Henares, president of the Brazilian Association of Tax Advocacy (ABAT), a discussion that needs to be matured in the context of tax transactions is the question of criteria for the taxpayer to adhere to or negotiate any proposal with the PGFN, especially in individual transaction mode.
"In the individual transaction, for example, there are several rules that need to be complied with, such as explaining the reasons for the request, the taxpayer's history, the equity situation, the reasons for the economic and financial crisis, financial statements, among others. But you also have to present account statements and a list of the partners' private assets, for example. I think it's a problem when you start bringing so many duties so that an eventual transaction right is granted”, he explains.
For Henares, the ideal is for a discussion to be held to think about whether all these duties "are within the power given by the legislation to the Treasury Attorney or whether they are placing duties that, due to the eventual non-fulfillment of one of them, the taxpayer is unable to individual transaction. These issues, which are very much in the ordinance [PGFN 9.917/2020], have to be worked on better"
Among the three types of transaction currently available, the one dealing with litigation theses is the one that has the most room to grow, according to the lawyers. “I think the part that has the most to grow is the theses, because the other transaction notices will end up becoming more repetitive”, explains Daniel Zugman, a partner at BVZ Advogados.
In June of last year, Ministry of Economy ordinance No. 247 disciplined the criteria and procedures for the preparation of a proposal and execution of a transaction by adhesion in the tax litigation of relevant and widespread legal controversy. However, until August of this year, only one notice with a transaction proposal of this kind, the No. 11/2021, on the topic of “social security contributions on PLR”, was launched.
“When I look at the litigation transaction I think it is under-explored. See, I've had ordinance 247 since June 2020, but only one proposed theme. How many tax theses do we have being discussed in the Judiciary? I have 40% of the entire judicial stock in tax foreclosure and easily have a number of tax cases that exceed 30 million. It has fertile ground to explore, with the potential to finalize millions of disputes”, says Andréa Mascitto, professor at FGV.
In Article 28 of Ordinance No. 247, there are a number of actors eligible to suggest topics that may be subject to the transaction of litigation theses, such as the president of Carf, the Federal Council of the OAB, the CNJ, in addition to the president of a confederation representing a category economic or trade union centrals, qualified to appoint councilors in CARF.
According to the tax expert, it would be interesting to analyze how the first public notice issued, for PLR, brought constructive lessons for future proposals for litigation theses. This is because, after the announcement was made public, it was necessary for the PGFN issued an opinion clarifying taxpayers' doubts. “Could it be that on other occasions we can't learn what was discussed for the first public notice and expand it to a prior public discussion to have a round public notice in which people sign up?”, points out Mascitto.
In the view of Ricardo Soriano de Alencar, Attorney General of the National Treasury, in relation to the PLR notice, “as it was the first experience of transaction in litigation, it is natural that the model will undergo improvements as it consolidates”.
Alencar also emphasizes that “society's participation is fundamental for the institute's maturation and it is important that there is no doubt that the PGFN is open to dialogue”.
Possibly Eligible Themes
The request of JOT, lawyers listed some topics that could be the object of future tax transaction notices based on their day-to-day experiences and based on the requirements that need to be fulfilled for a thesis to be eligible. However, ensuring all the necessary metrics depends on a thorough jurimetric analysis.
Among the main rules, the following stand out: the need for the issue to have demands being processed in at least three federal regional courts, or to have at least 50 processes involving the discussion; involve amounts above R$1 billion; in addition to divergent decisions that, preferably, are not objects of general or repetitive repercussions. According to the PGFN, there are actually other topics under study. "It is not prudent, however, to anticipate them, as they are still in the technical and legal analysis phase."
“In my opinion, split-ball discussions, of interpretation of legislation, would be eligible. For example, the cases of goodwill in corporate restructuring operations, especially in a vehicle company. It is an issue that generates a lot of litigation, has a very high value involved and it is a discussion in which taxpayers have good reasons and the tax authorities too. Better than betting on the Judiciary was to reach a consensual solution”, exemplifies Carlos Daniel Neto, partner at Daniel & Diniz Sociedade de Advogados.
For Mariana Martins, from CMartins Advogados, the theses that she lists, without harming the discussions that are being matured at Carf, would be those in which there was a reversal of jurisprudence by the Federal Supreme Court last year. “Constitutional holiday third: the STF changed the understanding of the STJ and several companies had already stopped paying. Now everyone is in limbo, with the modulation issues still outstanding. But, in the event that the taxpayer has to pay retroactively, I think we should open a notice”, he explains.
Another issue that the tax specialist mentions is the inclusion of the tax on the tax base in the calculation basis of the Import Tax [theme 1.014 in STJ]. Finally, it indicates that a notice on the inclusion of ICMS in the CPRB calculation basis would also be interesting [theme 1.048 on the STF].
Daniel Zugman, from BVZ Advogados, made an analysis based on the annual inspection plan of the Federal Revenue of Brazil. “Every year, the Revenue designs an inspection plan. In it, it specifies some operations, some problems that it intends to focus more on. So in the last two or three years some operations come up repeatedly. It seems to me that in these situations it would be interesting to have a transaction proposal. Because it is already something that the Revenue has been working on and these are matters with divergent decisions”, he says.
Zugman lists the possibility or not of using an investment fund and participation for tax planning, in addition to discussions on the use of tax benefits in financial market investments by Brazilian taxpayers who have offshore.
Finally, the tax expert cites a historical controversy involving a customs question about the criteria to characterize an import by order or by account and order. “Depending on the situation your import fits into, you may have more tax benefits than another. And there is no objective criterion in the legislation defining what each of these imports is. This is a highly disseminated litigation, figures that must be hundreds of billions, and it is a discussion that impacts the entire import world. A transaction notice aiming at these criteria could be interesting, bringing some clarification”, he concludes.
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