Tax Liabilities in Judicial Reorganization

Installment plans, tax transactions, and federal, state, and municipal programs can reduce the impact of tax liabilities and contribute to the preservation of the company.

Tax liabilities require a specific strategy.

Tax liabilities are one of the main challenges faced by companies in crisis. When a company enters judicial reorganization, the tax issue requires special attention: tax credits, as a rule, are not subject to the conditions stipulated in the Judicial Reorganization Plan, such as discounts, grace periods, and deadlines negotiated with private creditors.

Therefore, approving a good recovery plan is not enough. It is necessary to develop, in parallel, a strategy for regularizing debts to the Federal Government, the States, and the Municipalities.

There are alternatives to reduce the impact of tax debt.

The legislation offers different instruments that can be used according to the company's financial reality, such as special payment plans and tax transactions.

Depending on the applicable modality, these solutions may allow for reductions in interest, fines and charges, extension of payment terms, more suitable down payment conditions, installments compatible with financial capacity and, in legally authorized cases, use of credits, court-ordered payments, tax losses and negative CSLL (Social Contribution on Net Profit) base.

States and municipalities can also create specific regularization programs. In São Paulo, for example, state and municipal programs have already offered differentiated conditions for certain debts, reinforcing the importance of continuously monitoring available opportunities.

The strategy should be customized.

One of the main mistakes is treating all tax liabilities as a single debt.

A company may have federal, state, and municipal debts, each subject to different rules, programs, and negotiation possibilities. Therefore, it is essential to conduct an individualized assessment of liabilities, also considering tax enforcement proceedings, liens, guarantees, existing payment plans, and the impact of installments on cash flow.

In certain situations, the best strategy may involve a combination of solutions: a transaction with the federal government, a specific program for state debts, and a municipal negotiation, for example.

Judicial reorganization and tax liabilities need to go hand in hand.

For companies whose debt is predominantly tax-related, structuring tax debt can be crucial for successful recovery.

The goal should not simply be to "installment the debt," but to find a solution that reduces the cost of liabilities, preserves cash flow, and aligns payments with the company's financial capacity.

How can we help?

Our firm works in an integrated manner in the analysis of tax liabilities and judicial reorganization, seeking to identify the most appropriate legal and economic alternatives for each company.

Our role may involve:

• Diagnosis and organization of tax liabilities;
• Identification of available installment plans and transactions;
• analysis of federal, state, and municipal programs;
• comparison of the financial impact of the alternatives;
• Negotiation with Attorney General's Offices and Public Treasuries;
• Integration of the tax strategy into the Judicial Reorganization Plan;
• Monitoring of tax enforcement proceedings and asset risks.

If your company is undergoing judicial reorganization, intends to file for it, or has significant tax liabilities, advance planning can make the difference between an unviable recovery and a sustainable financial structure.

Count on our team to assess your company's tax liabilities and build an integrated strategy for tax recovery and regularization.

Article written by: Vitor Ferrari, Samar Majzoub and Alex Santos.