On January 12, 2023, Joint Ordinance No. 1/2023 was published, drafted by the Attorney General's Office of the National Treasury and the Federal Revenue of Brazil, establishing the Tax Litigation Reduction Program, establishing favorable conditions for the renegotiation of tax debts under discussion within the scope of the Federal Revenue Judgment Offices (“DRJ”) and the Administrative Council of Tax Appeals (“CARF”). In addition, the Ordinance 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 enterprises and small businesses.

We highlight that the program is part of the measures in the economic area that were announced by the Federal Government last week for fiscal recovery, with the intention of balancing the budget forecast for the year 2023 (check out our information on the subject by clicking here).

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.

Furthermore, the Ordinance established that the limits (set out in the paragraph above) for individuals, microenterprises, small businesses, cooperative societies, civil society organizations regulated by Law No. 13,019/2014, educational institutions and Santas Casas de Misericórdia, will be 70% and 55%, respectively.

For the negotiation of tax credits in small-value litigation or registered as federal debt for more than one year, with values lower than 60 minimum wages (R$ 78,120.00), the taxpayers must be individuals, microenterprises or small businesses. In addition, a down payment corresponding to 4% of the consolidated value of the credits transacted must be made (in up to four installments). In addition, the remaining balance may be paid in two ways: with a reduction of 50% of the total tax credit, in up to two months; or with a reduction of 40%, in up to eight months.

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.

Adhesion to the program may be formalized through the e-CAC portal, from 8 am on February 1, 2023 until 7 pm on March 31, 2023, by filling out the respective forms and paying the first installment of the installments. However, if the debts transacted refer to active debt of the Union for more than one year, adhesion must be made through the Regularize Portal, within the same period.