“Litígio Zero” Program: Brazilian authorities (RFB and PGFN) issued the Joint Ordinance No. 01/2023, establishing new modalities of tax settlement
Thursday, March 8th, 2023
On January 12th, 2023, the Brazilian authorities (RFB and PGFN) published the Joint Ordinance No. 01/2023, establishing the Tax Litigation Reduction Program (PLRF), as one of the tax recovering measures implemented by the new Finance Minister, the so-called “Zero Litigation” Program (Litígio Zero, in Portuguese).
Aiming at reducing the tax liabilities and tax litigation, the Program was introduced as an exceptional tax offer of tax regularization, establishing two new tax settlement modalities: (i) settlement of tax debts that are under Administrative Courts; and (ii) settlement of small-value debts under litigation, including executable ones – except the tax debts owed by legal entities subject to the tax simplified regime (Simples Nacional, in Portuguese).
i. Settlement of tax debts under discussion before Administrative Courts:
- The settlement may be performed with or without an upfront payment and benefits vary from the level of recoverability of the tax debt, which is measured by the criteria provided by Chapter 2, of Ordinance PGFN No. 6,757/22.
- For the modality that doesn’t require an upfront payment and the debts are classified as having a hard recoverability or as irrecoverable, a 100% discount upon penalties and interest should be granted, provided that it is respected a limit of 65% total discount upon the total value of each debt subject to the settlement. In this scenario, taxpayers should perform the payment of at least 30% of the amount of the outstanding balance in cash, in up to nine monthly and successive installments.
- For debts classified as having high or medium recovery, the minimum amount of 48% of the consolidated value of the transacted tax debt should be paid in cash, in up to nine monthly and successive installments – without the possibility of discounts or reductions, in this case.
- For both scenarios, the Program authorizes that the remaining balance is paid by NOLs balance offsetting, calculated until 31 December 2021.
- Furthermore, the Joint Ordinance No. 01/2023 also allows tax debts are paid with an upfront cash payment equivalent to 4% of the consolidated value of the tax debts settled (without any reduction or discounts), in up to four installments. In this modality, the outstanding balance may be paid with a reduction of up to 100% of the amount of interest and fine, observing the limit of up to 65% of the value of each transaction, in up to two monthly and successive installments, or up to 50%, in up to eight monthly and successive installments.
ii. Settlement of small-value debts under litigation, including executable ones – except the tax debts owed by legal entities subject to the tax simplified regime (Simples Nacional, in Portuguese):
- Tax debts with a value of up to 60 minimum wages, regardless of the classification of the debt, and which have as a taxpayer a natural person, microenterprise, or small business, may be settled by a 4% cash upfront payment upon the amount transacted, in up to four installments. As for the outstanding balance, the amount can be settled in up to two monthly installments, with a reduction of 50% of the value of the tax debt, including the principal amount, or in eight monthly installments, with a 40% reduction of the tax debt.
- This modality also applies to executable tax claims entered with the federal government for more than 1 year, whose application should be performed through the REGULARIZE system.
Taxpayers can apply for PRLF from February 1st, 2023 (8 am) until March 31st, 2023 (7pm), through e-CAC system.
NNB Advogados has a specialized team in tax area and qualified to assist companies in consultative and litigious demands. To learn more about how we can help you, please contact us.