Put Mariana Martins – 22/06/2020

ME/PGFN Ordinance No. 14,402/2020 was published today (17.06.2020) in the DOU, which regulates the long-awaited exceptional transaction (previously referred to as “new extraordinary transaction”) to settle federal tax debts, due to the effects of the Covid-19 pandemic on the prospect of receiving such amounts by the PGFN.

The benefit exclusively covers debts registered as active debt, whether or not subject to legal proceedings, with suspended or non-suspended enforceability, not paid in installments or which have already been subject to a previous installment plan that was terminated, and whose updated value does not exceed R$150,000.00 (one hundred and fifty million reais).

The measure, announced just over a week ago by the Attorney General's Office, comes as a relief to companies that have had their businesses impacted by the pandemic, and certainly comes to replace the other special installments that are intended to be implemented, whose respective Bills are being processed in Congress with wordings that are quite favorable to companies and individuals.[1]

The completion of the exceptional transaction is linked to the assessment, by the PGFN, of the degree of recoverability of the tradable values, through the assessment of the economic and payment capacity of the registered debtor, and from then on discounts will be granted according to the possibility of paying off the debts, observing the maximum limit of 50% of its total value.

In general terms, for the debtor taxpayer to be eligible for the exceptional transaction, it must be demonstrated that he/she is unable, to some extent, to pay the full amount of the debt within five years, without discounts, taking into account the impacts of the Covid-19 pandemic on his/her cash flow or income, if an individual.

Specifically in the case of companies, the ability to pay will be considered impaired. if there is a reduction, by any percentage, in the sum of the monthly gross revenue of 2020, starting in March and ending in the month immediately prior to the month of membership, in relation to the sum of the monthly gross revenue of the same period in 2019.

To assess the debt payment capacity, the PGFN may use the information declared by the debtor company in the ECF, EFD-Contributions, in the input and output invoices, in addition to that informed in other declarations, in the case of a legal entity, or in the income tax declaration (DIRPF) and in the DIRF, in the case of individuals.

The credits will then be classified by the PGFN in decreasing order of recoverability, as follows:

• type A credits: credits with a high recovery prospect;
• type B credits: credits with an average recovery prospect;
• Type C credits: credits considered difficult to recover; and
• type D credits: credits considered unrecoverable.

It is worth noting that among the irrecoverable credits, indicated in type D, debts of legal entities that have been declared bankrupt, in judicial or extrajudicial recovery, in judicial liquidation or in extrajudicial intervention or liquidation are included, regardless of the date of their occurrence.

Unlike the first extraordinary transaction, regulated by the PGFN through Ordinance No. 9,924/2020, the exceptional transaction brings, in addition to the possibility of installment payments of outstanding amounts, the offering of discounts on type C and D credits, as long as there is no reduction greater than 50% or 70% of the total value of the transacted debt, as the case may be.

We present below, in summary form, the general conditions for enjoying the new exceptional transaction:

I – For individual entrepreneurs, micro-enterprises, small businesses, educational institutions, Santas Casas de Misericórdia, cooperative societies and other civil society organizations covered by Law No. 13,019/2014, whose credits are considered irrecoverable or difficult to recover (types C and D)

 Down payment of 0.334% of the consolidated value of the credits transacted in up to 12 installments, with a reduction of up to 100% of interest, fines and legal charges limited to:

• 70% of the total value of each credit for payment in 36 installments;
• 60% of the total value of each credit to be paid in 60 installments;
• 50% of the total value of each credit to be paid in 84 installments;
• 40% of the total value of each credit for payment in 108 installments; and
• 30% of the total value of each credit for payment in 133 installments.

II – For other legal entities whose credits are considered irrecoverable or difficult to recover (types C and D)

 Down payment of 0.334% of the consolidated value of the credits transacted in up to 12 installments, with a reduction of up to 100% of interest, fines and legal charges limited to:

• 50% of the total value of each credit to be paid in 36 installments;
• 45% of the total value of each credit to be paid in 48 installments;
• 40% of the total value of each credit for payment in 60 installments;
• 35% of the total value of each credit to be paid in 72 installments; and
• 70% of the total value of each credit for payment in 133 installments.

 II – Companies undergoing judicial recovery, judicial liquidation, extrajudicial liquidation or bankruptcy

 Down payment of 0.334% of the consolidated value of the credits transacted in up to 12 installments, with a reduction of up to 100% of interest, fines and legal charges limited to:

• 50% of the total value of each credit to be paid in 72 installments.

According to ME/PGFN Ordinance No. 14,402/2020, the exceptional transaction will be carried out exclusively by adhering to the PGFN's proposal, except in the event that the debt subject to the negotiation exceeds R$ 150,000.00 (one hundred and fifty million reais) mentioned above, where the taxpayer will be allowed to present an individual proposal.

The taxpayer must provide the necessary information and adhere to the exceptional transaction proposal formulated by the PGFN on the Regularize portal during the period of July 1st to December 29th, 2020, it is possible to migrate other transactions previously adhered to the exceptional one, if this proves to be more advantageous.

Our tax team is at your disposal or your company's disposal for any questions regarding the matter, as well as to assist you with the procedures necessary to adhere to the exceptional transaction.

[1] For example, PL 2735/2020, PL 2341/2020 and PLC 152/2020.