By: Guilherme Martins and João Pedro Gimenes

On March 31, 2023, Joint Ordinance No. 3/2023 was published by the Attorney General's Office of the National Treasury (PGFN) and the Federal Revenue of Brazil (RFB), in order to extend the deadline for joining the Tax Litigation Reduction Program (PRLF), also called “Zero Litigation”, which may be formalized until May 31, 2023, at 7:00 p.m.

The program is part of the Federal Government's fiscal recovery measures announced at the beginning of this year, and is an exceptional tax regularization measure that provides for the possibility of renegotiating tax debts, based on favorable conditions.

Currently, this can be done through the Tax Transaction for debts discussed with the Federal Revenue Judgment Offices (“DRJ”) and the Administrative Council of Tax Appeals (“CARF”). In addition, Ordinance (n° 01/2023) establishes special conditions for the payment of small-value debts (up to 60 minimum wages) registered in the active debt of the Union and owed by individuals, micro and small companies, or for any taxpayer who has a case under judgment in the administrative sphere with amounts considered irrecoverable or difficult to recover.

The first type of negotiation provided for in the Ordinance involves the settlement of tax debts that are pending judgment within the scope of tax administrative litigation (DRJ and CARF). The benefits covered by this modality depend on the degree of recoverability of the debts, which can be considered as irrecoverable, difficult, medium or high chance of recovery. This degree is determined according to the time the debt has been under collection, the existence of active or terminated installments, the prospect of success of the administrative and judicial collection strategies, history of debt installments, the economic situation and the taxpayer's ability to pay, among other criteria that are established in Ordinance PGFN No. 6,757/2022.

If the degree of recoverability is difficult or irrecoverable, there will be a discount of 100% from the amount of interest and fines, observing the limit of 65% from the total amount of each credit to be negotiated, so that at least 30% of the consolidated amount must be paid in cash, in nine installments. The remaining balance must be paid through tax loss credits or negative CSLL calculation basis, determined until December 31, 2021.

In turn, if the debts are considered to be of high or medium recovery, there will be no discounts or reductions in interest and fines, however it is expected that at least 48% of the debts must be paid in cash, in nine successive installments, while the remainder must be paid using tax losses or negative CSLL calculation basis, determined until December 31, 2021.

However, if the debt is negotiated “with down payments”, the recoverability of the credits is disregarded. The down payment must be 4% of the consolidated value of the credits transacted, and may be paid in four installments. In this case, there may be a reduction of up to 100% of interest and fines, observing the following limits: 65% of the value of each credit transacted, in up to two monthly and successive installments; and 50% of the value of each credit transacted, in up to eight monthly and successive installments, also allowing the use of tax losses and negative CSLL calculation basis.

Individuals, micro-enterprises and small businesses that adhere to the transaction regarding small-value loans may pay the down payment in up to 4% divided into up to 4 monthly installments, without discount. The remaining amount may be paid in up to 2 months, with a discount of 50% from the total, or in up to 8 months, but with a discount of 40%. In this modality, the use of federal court orders is permitted to amortize or settle the outstanding balance.

Finally, we highlight that for all types of service, the minimum installment is R$ 100.00 for individuals, R$ 300.00 for small and micro-enterprises and R$ 500.00 for other legal entities.

The extension of the deadline meets the requests sent by the Federal Accounting Council (CFC), the National Federation of Accounting Services Companies and Advisory, Expertise, Information and Research Companies (Fenacon) and the Brazilian Independent Auditing Institute (IBRACON), which requested the extension of the deadline, favoring taxpayers and accountants who needed more time to request membership.

Adherence to the program can be formalized through the e-CAC portal, from 8 am on February 1, 2023 until 7 pm on May 31, 2023, by filling out the respective forms and paying the first installment of the benefits.