On 12/28/2018, the Federal Revenue Service published Normative Instruction No. 1,862 of 2018, which provides for the procedure for imputing tax liability within the scope of the Brazilian Federal Revenue Service.

The aforementioned Normative Instruction considers that tax liability presupposes the existence of a master rule of tax incidence, referring to the tax obligation and the master rule of tax liability. Furthermore, it considers that the imputation of tax liability is the administrative procedure that attributes liability to a third party who is not included in the tax relationship as a taxpayer or tax substitute according to legal hypotheses.

 Therefore, the Tax Auditor who identifies a hypothesis of multiple taxpayers in the execution of a tax procedure related to taxes administered by the IRS must formalize the imputation of tax liability in the official assessment, without the need for the Tax Procedure Distribution Term (TDPF). It is important to emphasize that when making the official assessment, the Auditor must prove the occurrence of the act or omission.

All taxable persons charged must be notified of the Notice of Violation, with a deadline for the requirement to be met or for each of them to file an objection.

In the event that the offsetting carried out by means of the submission of the Offsetting Declaration is not approved, the tax liability will be attributed in the respective decision, without prejudice to the imposition of an applicable isolated fine in the official assessment. In the event that the offsetting is considered undeclared, the liability will be attributed, also without prejudice to the assessment of the applicable isolated fine, and will be attributed:

• through a Tax Liability Assignment Term in the tax return of the taxpayer who acknowledges the debt stated in the Compensation Declaration considered undeclared;

• by means of an official launch of the tax credit relating to the debt stated in the Compensation Declaration considered undeclared, in the event that the taxpayer has not confessed it in another declaration.

In cases where the definitively constituted tax credit is not extinguished, the Tax Auditor who identifies cases of multiple taxpayers prior to referral for registration in active debt must formalize the imputation of tax liability through a Tax Liability Imputation Term. The taxpayer is allowed to appeal the decision.

With full payment of the credit, objections, statements of disagreement and other appeals filed by the other parties lose their purpose. And in the case of adherence to the installment plan, any objections, statements of disagreement and other appeals filed by the other taxpayers will not be considered.

The compensation declared by one of the taxable persons extinguishes the tax credit issued under the condition of its subsequent approval, with effect for the other taxable persons, and prevents the assessment of objections, expressions of disagreement or appeals filed by the other taxable persons.

Finally, the Normative Instruction provides that the tax credit will be forwarded to the National Treasury Attorney General's Office, for registration as active debt, only after the end of the amicable collection period for all obligated parties.

The Mazzucco e Mello Advogados tax team is available to provide any clarification on these topics.

By Camila Friaça