The Attorney General's Office of the National Treasury (PGFN) and the Brazilian Internal Revenue Service (IRS) published Public Notices No. 25, 26 and 27/2024, within the scope of the Integral Settlement Program, setting forth the option to settle certain debts in administrative or judicial tax disputes embroiled in significant and widespread legal controversy.
Public Notice No. 25/2024 establishes the option for the settlement of debts related to the deduction of goodwill in the following situations:
- Deduction of intragroup goodwill through abusive tax planning
- Deduction of tax goodwill through a vehicle entity via abusive tax planning
The Public Notice No. 26/2024 allows for the settlement of debts under dispute related to the production of non-alcoholic beverages:
- The correct fiscal classification of inputs produced in the Manaus Free Trade Zone (ZFM) (i) for the purpose of use of IPI tax credits, or (ii) to define the tax rate of the PIS/Pasep and COFINS; and
- The correct valuation of the prices of concentrate kits, excluding marketing and royalty expenses for the use of IPI credits and the impact on the calculation of IRPJ and CSLL.
The Public Notice No. 27/2024, in turn, allows the settlement of debts related to the following matters:
- The levy of social security contributions and contributions to other entities or funds on amounts paid as PLR
- The levy of individual income tax (IRPF), social security contributions, and contributions to other entities or stock options;
- The levy of withholding income tax (IRRF), social security contributions, and contributions to other entities or funds in amounts contributed by employers to complementary private pension programs.
Enrollment into the Public Noticesis open until 7 p.m. June 30, 2025, and applies in the event of enrollment into federal overdue tax liability, a lawsuit, motion-to-stay tax foreclosure, or an administrative defense or appeal pending of final judgment, related to the controversy and the debts.
There is no value threshold for a settlement, and discounts are applicable to all Notices that range from 25% to 65% on the outstanding balance and payment in up to 60 monthly installments, depending on the payment method:
- 65% discount, with a minimum 30% up-front payment in an initial installment, with the remaining balance paid in up to 12 monthly installments;
- 55% discount, with a minimum 25% up-front payment in an initial installment, with the remaining balance paid in up to 24 monthly installments;
- 45% discount, with a minimum 20% up-front payment in an initial installment and the remaining balance paid in up to 36 monthly installments;
- 35% discount, with a minimum 15% up-front payment in a lump sum and the remaining balance paid in up to 48 monthly installments;
- 25% discount, with a minimum 10% up-front payment in an initial installment and the remaining balance paid in up to 60 monthly installments, except in the case of debts related to employers' social security contributions on payroll, as well as those of workers and other insured persons under social security, when the remaining balance can be paid in 59 monthly installments.
Penalties can be included in the settlement, including qualified penalties, which will be subject to same discounts applied to the principal debt.
Any deposit linked to the debts to be settled will be automatically reverted to the Federal Government, and the payment conditions mentioned above will be applied to the remaining balance.
The program allows the use of tax loss and negative basis to settle the remaining balance, as long as the following thresholds are observed:
- 10% for discounts of 65% and 55%;
- 15% for discounts of 45% and 35%; and
- 20% for a discount of 25%.
Note that the enrollment into the settlement program implies the confession of debts, withdrawal of administrative defenses, and waiver of legal claims. However, it does not imply the release of liens and guarantees provided in relation to the debts included in the settlement until the agreement is fully settled.
Finally, it is worth noting that the Public Noticesestablishes that the discounts granted in the settlement will not be included in the calculation basis for Income Tax, CSLL, PIS/Pasep Contributions, and COFINS.
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