Tax transaction: how big is this benefit?

A transaction is a type of agreement or negotiation in which the parties make mutual concessions to extinguish the obligation. It is an institute widely used in civil law, in which the parties are on equal terms, but, as already mentioned, not so common in tax law.

The tax transaction, in this sense, is based on measures that the parties – whether the taxing entity or the taxpayer – accept so that the tax obligation is extinguished in accordance with the agreed terms. Installment is a type of transaction, as it changes the method of paying tax debts, which would eventually be paid in a single installment, to a new alternative: payment in several installments.

The tax transaction is an old subject in tax law, despite being considered a completely ineffective measure in the recent past. The institute (of tax transactions) has been provided for in the National Tax Code (CTN) for years, but it has never been regulated.

This scenario resulted in the issuance of Provisional Measure (MP) No. 899/2019 – called the Legal Taxpayer MP – which can be considered the first attempt to regulate the institution. After the legislative process, the Legal Taxpayer MP was converted into Law No. 13.988/2020, published on the 14th. In this way, the tax transaction is no longer limited to a forecast without using the CTN, but becomes a regulated institute by law and ordinance published by the PGFN.

With the publication of Law No. 13.988/2020, tax transactions may occur in three ways:

– by individual proposal or adherence, in the collection of debts registered in active debt or in the collection of debts within the jurisdiction of the Attorney General's Office;

– by adhesion, in other cases of judicial or administrative tax litigation;

– by membership, in small value tax litigation.

From a practical point of view, the big difference between the modalities is the way in which the taxpayer can join the transaction.

In the individual modality, the transaction proposal can be made by both the taxpayer and the public entity.

This modality will be based on greater subjectivity, as it will be based on documentation or a specific scenario that conditions the possibility of transaction.

In the subscription modality, it is possible to think – analogously – of a Refis. In this type of tax amnesty, the government lists the requirements that must be met, such as the date of the triggering event, type of tax and amount involved. If the taxpayer meets these requirements, he or she may join the amnesty. The adhesion transaction will also work under these terms: as long as the proposed requirements are met, the taxpayer will be able to join.

On April 16, the PGFN published two ordinances on the subject. Ordinance No. 9917/2020 regulates the transaction of federal debts registered as active debt, called ordinary transactions. Ordinance No. 9924/2020 was also published, which specifically addresses the so-called extraordinary transaction, resulting from the Covid-19 pandemic.

To date, the PGFN has released the adhesion transaction modalities for debts over 15 years old – the so-called debts that are difficult to recover – and extraordinary transactions. In both cases, it is possible to join the transaction directly on the PGFN website, with access via the taxpayer's digital certificate.

The individual modality, on the taxpayer's initiative, is in force upon presentation of a tax recovery plan at the taxpayer's PGFN domicile. In other words, unlike the opt-in modality, the taxpayer must formalize the request with the PGFN and attach the documentation listed in ordinance no. 9917/2020.

Although the possibility of membership is broad, Law No. 13.988/2020 itself provides prohibitions on membership such as the inclusion of fines of a criminal nature, the granting of discounts to credits arising from the FGTS, as long as it is not authorized by the Board of Trustees and the inapplicability of measure for persistent debtors, defined in terms of specific law.

Furthermore, there is an express prohibition on granting discounts for debts arising from the Simples Nacional calculation. However, this prohibition is linked to the need to issue a complementary authorizing law. This rule will probably be published soon with additions to Complementary Law No. 123/2006, which deals with Simples Nacional. Until this happens, it is not possible for companies opting for Simples Nacional to transact their debts.

The extraordinary transaction, resulting from the new coronavirus pandemic, is an additional payment method. In it, the taxpayer agrees to pay an entry corresponding to 1% of the debt amount in up to three installments and divide the remainder over up to 81 months. In the case of individuals, individual entrepreneurs, micro-enterprises, small businesses, educational institutions and other types provided for in the ordinance, the debt may be divided into up to 142 installments.

As with federal amnesty programs, the taxpayer who adheres to the tax transaction must waive any legal issue regarding the debt, as well as objections, appeals and legal actions. The great advantage of this benefit, especially compared to ordinary installments, is the payment period, since the latter provides for a maximum period of 60 installments.

In general terms, there is no equality or balance between the transacting parties (PGFN and taxpayers), and this is very clear in the individual transaction proposals. The wording of Ordinance No. 9917/2020 lists an extensive list of documentation that must be presented by the taxpayer who wishes to transact with the PGFN, in addition to a tax recovery plan in which the taxpayer's ability to comply with the proposed transaction will be demonstrated, in summary. .

Although we understand the meaning of the requests made by the Public Treasury, we also see the requests as exaggerated and even abusive at some points. One of these examples is the taxpayer's need to “declare that he did not alienate or encumber assets or rights with the purpose of frustrating the recovery of registered credits or recognize the alienation or encumbrance for the same purpose” to present the individual membership proposal.

Fraud in tax enforcement – ​​described in the declaration in question – is provided for in Brazilian legislation (article 185 of the CTN) as subject to liability by its own means. However, by demanding a declaration of this nature, the taxpayer could even be creating evidence that could affect his right to defense in the future.

What is clear is that PGFN has full control and decision-making power to define transactions. On the one hand, the membership modality is exclusive to the PGFN itself; on the other, when the proposal is made by the taxpayer, the decision to transact will be made based on a series of documents, which will be subject to a subjective analysis by the Attorney's Office.

As a new measure, it is still necessary to analyze in the practical scenario what the implications of the tax transaction with the PGFN will be. At first, it can be said that the adhesion modality, like the extraordinary modality, is even more beneficial as it is more similar to the federal installments and amnesties already established in the past.

As for the individual transaction, we will have to wait and see how the PGFN will be treated to clearly determine whether this measure really came to facilitate the relationship between the State and taxpayers – or whether we are back to the ineffectiveness of the transaction, as when it was just about CTN device.

*Júlia Barreto, associate lawyer at Freitas Ferraz Capuruço Braichi Riccio Advogados, collaborated.