Put Mariana Martins and Marcelo Blecher – 20/04/2020

Amid the economic crisis resulting from the effects of the COVID-19 pandemic, Law 13,988/2020 was sanctioned and published in the Official Gazette of the Union (“DOU”) last Tuesday, April 14, 2020, as a result of the conversion into Law of Provisional Measure (“MP”) 899/2019. Named by the Federal Government as the “MP of the Legal Taxpayer”, the provisional measure was issued in October 2019 with the objective of encouraging the resolution of conflicts between the Tax Administration and taxpayers regarding federal tax debts, through the tax transaction.

Among the most relevant changes in relation to the original wording of the MP, the following stand out: (i) the possibility of granting discounts for all 3 (three) types of transaction (described in the table below); and (ii) the inclusion of art. 28[1], which determines the end of the casting vote in trials carried out within the scope of the Administrative Council of Tax Appeals (“CARF”). Until this change, in the sessions held by the aforementioned Council, in the event of a tie, the judgments were broken by the president of the adjudicating body, a representative of the Tax Authorities. With this change, in the event of a tie, the case will be judged in favor of the taxpayer.

Furthermore, as provided for in MP 899/2019, the wording of Law 13,988/2020 determines that the transaction institute must serve the public interest and observe the principles of equality, tax capacity, transparency, morality, reasonable duration of processes and tax efficiency, and will be classified into 3 (three) modalities, as summarized below:

In addition to the aforementioned legal diploma, on Thursday, 04/16/2020, two Ordinances issued by the PGFN were published in the DOU that regulate, respectively (i) the transaction in the collection of the Union's Active Debt (PGFN Ordinance No. 9,917/2020); and (ii) the extraordinary transaction in the collection of the Union's Active Debt, due to the effects of the pandemic caused by COVID-19 (PGFN Ordinance No. 9,924/2020).

According to Ordinance PGFN 9,917/2020, there will be 3 (three) modalities for the transaction of the collection of the Union's Active Debt: (i) transaction by adherence to the PGFN proposal; (ii) transaction by individual proposal of the PGFN; and (iii) transaction by individual proposal of the debtor.

Under the terms of the aforementioned Ordinance, (i) the transaction by adhesion will be exclusively intended for debts registered in the Active Debt of the Union and whose consolidated value is equal to or less than R$ 15,000,000.00 (fifteen million reais), while the (ii) individual transaction proposed by the PGFN and (iii) individual transaction proposed by the debtor will be intended for taxpayers who have debts that can be transacted above this value.

Transaction for the collection of debts registered in the Federal Government's Active Debt

• Modalities: (i) transaction by adherence to the PGFN proposal (debts of up to R$ 15,000,000.00) (ii) individual transaction proposed by the PGFN (debts above R$ 15,000,000.00); and (iii) individual transaction proposed by the debtor (debts above R$ 15,000,000.00).
• May dispose of: (i) the granting of discounts on fines, interest on arrears and legal charges relating to debts to be transacted that are classified as irrecoverable or difficult to recover[3], such as, for example, those belonging to taxpayers in the process of judicial recovery, judicial liquidation, extrajudicial liquidation or bankruptcy; (ii) the offering of special payment terms and forms, including deferral and moratorium; and (iii) the replacement or sale of guarantees and constraints.
• Discounts: (i) impossibility of reducing the principal amount of the credit, thus understood as its original value; (ii) reduction of up to 50% (fifty percent) of the total value of the credits to be transacted – which includes principal, fines, interest on arrears and legal charges, except if the debtor is an individual, ME or EPP, in which cases the discount may not exceed 70% of its total value.
• Settlement period: limited to 84 (eighty-four) months, unless the debtor is an individual, ME or EPP, in which cases the payment cannot exceed 145 (one hundred and forty-five) months.
• Other features: (i) the mere presentation of a settlement proposal does not suspend the enforceability of the debts covered by it nor the progress of the respective tax executions; (ii) in individual proposals, the settlement term may provide, when applicable, for the consent of the parties for the purposes of suspending the process, until the extinction of the credits or eventual termination; and (iii) automatic maintenance of the encumbrances resulting from the inventory of assets, fiscal precautionary measures and guarantees provided administratively or in tax execution actions or in any other legal action.

Already the PGFN Ordinance 9,924/2020, establishes conditions for extraordinary transaction in the collection of the Union's active debt, due to the effects of the pandemic caused by the coronavirus. According to the Ordinance, the extraordinary transaction will be made only by adherence to PGFN proposal, until 06/30/2020, and the spontaneous proposal of an individual proposal by the debtor taxpayer is prohibited, for the conditions specified.

Under the terms of the Ordinance in question, the extraordinary transaction will involve the payment of a down payment in the amount of 1% of the transacted debt, in up to 3 (three) equal and successive installments, with the remaining balance being paid in up to 81 (eighty-one) months for legal entities in general, and in up to 142 (one hundred and forty-two) months for the debtor who is an individual, individual entrepreneur, micro-enterprise or small business. For the payment of the first installment, a deferral of 90 (ninety) days will be offered, with its due date being the last day of the third month following the month of adhesion.

Unlike the conventional transaction (object of Law 13.988/2020 and regulated by PGFN Ordinance No. 9.917/2020, In the extraordinary transaction, there are no reductions in fines and interest on the value of the debts that are intended to be transacted, but only payment under the conditions mentioned above, with a reduced down payment and deferral of installments.

Adherence to the extraordinary transaction may be formalized through the PGFN's Regularize portal and is also subject to the presentation of a copy of the request to withdraw from the actions, objections and appeals related to the transacted debts, with a request to terminate the action with resolution on the merits, in accordance with art. 487 of the CPC/2015, by the end of August.

Our tax team is at your disposal for any questions regarding the matter, as well as to assist you with the preparation of an individual transaction proposal or with the procedures related to membership, if necessary.

[1] Art. 28. Law No. 10,522 of July 19, 2002, shall come into force with the addition of the following art. 19-E:

“Art. 19-E. In the event of a tie in the judgment of the administrative process for determining and demanding tax credits, the casting vote referred to in § 9 of art. 25 of Decree No. 70,235 of March 6, 1972 shall not apply, and the decision shall be resolved in favor of the taxpayer.”

[2] Transactions that have as their object: (i) the reduction of fines of a criminal nature; and (ii) debts arising from Simples Nacional and FGTS are prohibited.

[3] Art. 24. For the purposes of the provisions of this Ordinance, credits registered as active debt of the Union are considered irrecoverable when:

I – registered for more than 15 (fifteen) years and without a current record of guarantee or suspension of enforceability;

II – with enforceability suspended by court decision, under the terms of art. 151, IV or V, of Law No. 5,172, of October 25, 1966 – National Tax Code, for more than 10 (ten) years;

III – owned by debtors:

1. a) bankrupt;
2. b) under judicial or extrajudicial recovery;
3. c) in judicial liquidation;
4. d) in extrajudicial intervention or liquidation.

IV – owned by legal entity debtors whose registration status with the CNPJ is:

1. a) discharged due to unsuitability;
2. b) written off due to non-existence in fact;
3. c) discharged due to persistent omission;
4. d) discharged due to the closure of bankruptcy;
5. e) discharged due to the closing of the judicial liquidation;
6. f) written off due to the closing of the liquidation;
7. g) unfit due to unknown location;
8. h) unfit due to lack of fact;
9. i) unfit person missing and not located;
10. j) unfit due to persistent omission;
11. k) unfit due to failure to make declarations;
12. l) suspended due to non-existence of fact.

V – owned by individual debtors with an indication of death.

VI – the respective tax enforcement proceedings have been archived pursuant to Article 40 of Law No. 6,830 of September 22, 1980, for more than 3 (three) years.

Sole paragraph. The situations described in items III, IV and V of the caput of this article must be included, respectively, in the CNPJ and CPF databases before the Special Secretariat of the Federal Revenue of Brazil of the Ministry of Economy until the date of the transaction proposal, and the debtor is responsible for the necessary measures to make the registrations effective.