On July 24, 2024, Normative Instruction No. 2,205/ of the Brazilian Federal Revenue Service (the "Instruction") was published, that regulates Article 25, paragraph 9-A, and Article 25-A of Decree No. 70,235/1972, establishing possibilities and manner for the exclusion of penalties, cancellation of the Tax Representation for Criminal Purposes ("RFFP"), and the regularization of tax debts, applicable to administrative tax proceedings resulting from a final decision favorable to the Federal Government, issued by the Taxpayers Council of Administrative Appeals ("CARF") through a casting vote.
Following the interpretation given by the Office of Attorney-General of the National Treasury ("PGFN") to Article 25-A of Decree No. 70,235/1972 under SEI Opinion No. 943/2024/MF, the Instruction rules that not every penalty can be excluded in the event of a definitive decision by CARF by casting vote, but only the following penalties set out in Law No. 9,430/1996:
(i) the entire penalty for the tax assessment mentioned in Article 44, caput, item I, if the main tax credit is maintained by the casting vote;
(ii) the isolated penalty referred to in Article 44, caput, item II, provided that there is a specific decision, by casting vote, regarding its maintenance;
(iii) increase of the penalty referred to in Article 44, paragraph 1, item VI, if maintained by casting vote, with the penalty referred to in Article 44, caput, item I being preserved;
(iv) increase of the penalty referred to in Article 44, paragraph 1, item VII, if maintained by casting vote, preserving the increase referred to in Article 44, paragraph 1, item VI, and the RFFP; and
(v) the increase of the penalty referred to in Article 44, paragraph 2, if maintained by a casting vote.
On the other hand, even if decided by a casting vote, the exclusion of the penalty and cancellation of the RFFP will not apply if the matter before the court relates to (i) isolated penalties (with the exception of the bases mentioned above); (ii) late payment penalties; (iii) customs penalties; (iv) tax liability; (v) the existence of a taxpayer's credit claim; or (vi) statutes of limitations.
To enjoy the effects of the Instruction, a taxpayer must file the request within 90 days of the notification of the "final" result rendered by CARF. During this term, the tax liability will be suspended.
The exclusion of penalties and the cancellation of the RFFP do not apply to decisions rendered by the CARF which became final before January 12, 2023.
The tax credits can be paid in up to 12 successive monthly installments, with a 100% reduction in interest on arrears. The request must be accompanied by payment of either the entire debt or the first installment.
It is worth noting that: (i) these conditions will not be cumulative with other reductions established by law; and (ii) these credits may be paid by using writs of payment ("precatório") as well as credits arising from tax loss and negative Social Contribution on Net Profit (CSLL) calculation basis, determined prior to the submission of the request.
Furthermore, the Instruction provides that submitting such a request implies the irrevocable and irreversible extrajudicial confession of the debt.
Finally, it should be remembered that this is not the first time that the Brazilian IRS has dealt with this theme, since IN RFB No. 2,167/2023 already regulated some of the aspects related to the operationalization of the benefits granted by Law No. 14,689/2023 (the "CARF Law"). However, IN RFB No. 2,167/2023 was revoked by the Instruction. To that end, the Instruction clarified some concerns raised by taxpayers at the time of IN RFB No. 2,167/2023's publication, as well as following PGFN's understanding in SEI Opinion No. 943/2024/MF, published earlier this year.
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