Brazil: Effects Of The New Brazilian Code Of Civil Procedure On Tax Proceedings

The new Brazilian Code of Civil Procedure (CPC) enacted by Law nº 13105/2015 and enforceable as of March 2016 will affect all pending civil claims, including those of tax nature that are also governed by the rules of said code.

We must remind that the tax matters in Brazil represent a very high amount in dispute, and the new code will help the tax disputes to have an earlier closing in a more safe procedure.

The procedural law has been, in general terms, modernized to make court performance more expeditious meanwhile the certainty, according to which procedural acts need to be performed, is ensured as it is also ensured the adversary system and legal defense.

Although one only type of appeal has effectively ceased to exist - the "agravo retido", an interlocutory appeal whose trial is postponed until the final judgment is appealed -, some of the created mechanisms may be time-saving solutions that will not affect the legal certainty. As a main example, we mention the trial of repetitive claims in a single proceeding (incidente de resolução de demandas repetitivas), which will certainly be useful for tax law cases.

This system might be largely used in tax litigation, specially those involving principles. Under said system, the judge, the court, the parties in the case and even the Public Prosecution Office and the Office of Public Defenders may plea for this kind of proceeding, and such plea is referred to the Presiding Judge. The proceeding is only launched if it is proved that the suits are effectively a repetition and that they discuss one same subject matter that is exclusively a legal question and there must exist risk to equal protection and legal certainty simultaneously.

Meanwhile the Court reviews the legal question discussed in the proceeding, all claims over the same subject matter are stayed and, once the Court has a ruling on the proceeding, the legal principle set therein will apply to all individual or class suits concerning the same legal question being judged within the jurisdiction area of the respective Court as well as to suits in the future that might discuss the same legal question that is decided in this type of proceeding.

Therefore, in case of a tax subject matter, the party itself may petition that such subject be tried pursuant to this type proceeding and the judgment on one single case will automatically apply to cases of past and future and the dispute over the right is settled (currently, every and all repeated claim involving a tax theory is individually tried by a competent judge, which obviously makes the litigation slower).

Furthermore, it has been created a rule pursuant to which a Court must analyze a proceeding according to a chronological order of conclusion to render a final or appellate decision by following a list of proceedings to be published by a registry and on the Internet. This measure may avoid situations where tax proceedings dated 1980 remain forgotten on the shelves of some court, because it is very usual that judges choose to try more recent cases to the detriment of aging cases.    

As to payment of legal fees owed by the Public Treasury for losing a trial, an important change was made as to how such fees are calculated, i.e. thresholds and caps are set pursuant to the amount in dispute (thus avoiding that any extremely low legal fees be imposed on the Public Treasury, which is common in most cases). For example, if a judgment payment is up to 200 minimum wages, legal fees are set 10 - 20% and may reach the minimum of 1% and the maximum of 3% of the judgment payment amount in cases whose dispute amount is over 100.000 minimum wages. This method puts an end to very low judgment payment amounts of a few thousand reais in cases involving millions, because the new code implements a very objective criterion pursuant to the amount in dispute and left no loopholes allowing a different interpretation. 

As to its privileges while in a litigation, the Public Treasury is still entitled to twice as much time to submit any statement in the proceeding; it was revoked, however, its entitlement to a term four times longer than the usual to file an answer. The circumstances in which a mandatory review in favor of the Public Treasury is allowed are now even fewer, became it substantially increases the minimum amount in dispute that allows the review. The federal government, for example, is only granted this benefit provided the judgment amount is not below one thousand minimum reference wages (today the dispute must have the minimum amount of 60 minimum wages only, so the mandatory review is permitted). 

Another relevant innovation is that the judge have now the possibility of ruling the merits only in part if, for instance, the case involves a legal matter that does not require further evidence and may be already held under advisement, on which a final decision may be rendered irrespective of any other existing matter in the same case that will still undergo production of evidence.  As a result, for instance, in a tax lawsuit that disputes a certain matter as well as a matter subject to expert examination, the judge may (actually, must) render a summary judgment on the merits of the matter instead of waiting for the production of evidence and only then decide on both matters in a single decision. 

Therefore, we may note that the main changes took into account the procedural lawmaker's intent to make the development of cases expeditious while preserving the legal certainty of the taxpayer of receiving an expeditious final decision with due compliance with the adversary system and legal defense.

The new code must become an important instrument to make the judicial proceedings in Brazil to have a much faster solution, which will allow Brazil to be prepared to receive new foreign investments for the following years, helping the country to grow in a solid basis. Only the next years will prove if the new code will have this ability. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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