Brazil: ICMS PEP – São Paulo – Joint Resolution No. 1, Of Feb. 28, 2013 – Treasury Office And Attorney General Office Of The State Of São Paulo

Last week, the effects of Joint Resolution no. 1 of the Treasury Office and Attorney General Office of the State of São Paulo, dated February 28, 2013, came into force, ruling on the necessary administrative proceedings for the settlement of debts of the Tax on the Circulation of Goods ("ICM") and of the Tax on the Circulation of Goods and Provision of Interstate and Intercity Transportation and Communications Services ("ICMS"), within the Special Installment Agreement Program ("PEP").

Adhesion to the PEP must be formalized between March 1, 2013, and May 5, 2013, and may include the ICM and ICMS debts relative to taxable events occurring up to July 31, 2012.

For such, it is necessary to access the ICMS PEP system (http://www.pepdoicms.com.br), using the same login and password used to access the Electronic Tax Office ("PFE") or the same login and password of the ICMS PPI system. It should be stressed that a request to register with the ICMS PEP system will be necessary, at the Tax Office tied to the establishment, for Taxpayers who do not have them yet.

When accessing the PEP system, the Taxpayer must select the debts that will be effectively settled under Decree 58.811, of Dec. 27, 2012. After this phase, it will be possible to simulate the payment terms within the available options and choose one of them. When completing the operation, an ICMS PEP number and the Adhesion Agreement will be generated along with the respective GARE-ICMS of the first installment or the lump sum payment.

In addition, the remaining balance of debt installments, recorded or not as collectible by the government (with some exceptions), may be settled through the ICMS PEP, which is to be requested by May 15, 2013. For debts that fit into such conditions, it will not be possible to directly include them through the system as described above.

Before, however, the Taxpayer must request the migration of the remaining balance of the previous installment plan to the ICMS PEP, which can be done through the Electronic Tax Office tied to the establishment. Later, the inclusion of the remaining balance of previous installment plans should be formalized in the PEP ICMS.

Moreover, the Taxpayer may also request: (i) the rectification of the debt values stated in the list; or (ii) the inclusion of debts stated in an information slip or ascertained by the tax authorities that are not included in the list; the request having to be decided within 15 (fifteen) days by the relevant Administrative Authority.

Also, it is optional for the Taxpayer to (iii) include amounts relative to voluntary admission of debt, subject to the provisions in article 88 of Law 6,374/1989, and the information slip relative to the ascertainment period of the admitted debt must be rectified by the taxpayer within 90 (ninety) days, notwithstanding the possibility of the slip being collected by the Tax Authorities.

In this case, the taxpayer may include several debts from March 1, 2013, to May 31, 2013, provided that the selected debts are different, generating an ICMS PEP number for each adhesion, observing that it will not be possible to change the terms after each inclusion has been formalized.

It is important to highlight that the following tax debts may be settled, exclusively through a lump sum payment (that is, they may not be paid in installments), arising from: (i) custom clearance of goods imported from abroad, when intended for trade or manufacture; (ii) tax to be collected on the basis of tax liability by tax substitution; and (iii) transactions or provisions of taxpayers not in good standing with the Tax Authorities, pursuant to item 4 of § 1 of article 36 of Law 6,374/1989, unless the debt is recorded as collectible and filed, in which case the settlement may be made in more than one installment.

After including the debts in the ICMS PEP, the due date of the first installment or the lump sum payment will be the 25th day of the current month, for adhesions occurring between the 1st and the 15th day. On the other hand, for adhesions of the period from the 16th to the last day of the month, the due date will be the 10th day of the subsequent month.

In case of an installment plan, the due date of the installments will be on the same day of the months following the due date of the first installment, and in case the installment is not collected within the due time, interest will incur at 0.1 % per day on the value of the installment in delay, in addition to financial surcharges concerning the installment plan.

Should the option be for an installment plan, the taxpayer must pay the first installment through a GARE-ICMS (tax collection slip), issued at this website: http://www.pepdoicms.com.br , up to the due date, and pay the subsequent installments through direct debit from the bank account held in a bank having an agreement with the Treasury Office.

If it is impossible to have a direct debit, the payment of the installments should be made through a State Collection Slip – GARE-ICMS, available at http://www.pepdoicms.com.br.

Furthermore, when the due date of the single installment or any other installment, including the first one, does not fall on a business day, the collection may be made on the following first business day, which will not constitute delay.

It is important to pay the installments, since the failure to pay the first one will imply the non-execution of the agreement to settle the debts. It should also be stressed that the tax debts included in the PEP may also be settled with the accumulated ICMS credit available in the bank account of the computerized system maintained by the Treasury Office, pursuant to item III of article 72 of the RICMS/SP (which, however, does not apply to the payment of attorneys' fees).

The taxpayer having accumulated credit, available at the tax account and wishing to use it in the PEP (except for the payment of attorneys' fees), is to access: http://www.pepdoicms.com.br, select the option "Use of Appropriated and Accumulated Tax Credit" and record the amount of accumulated credit available for the settlement of the single or falling due installments.

After recording the amount of accumulated credit in the ICMS PEP system, it will not be possible to record another amount until the previous request has been decided by the Regional Tax Officer. Moreover, the following is to be made available by the system: (i) updated amount of the installments (without attorneys' fees); (ii) number of installments to be settled by the recorded amount of accumulated credit; (iii) the "Request for the Settlement of PEP Installments with Accumulated Credit"; (iv) the "State Collection Slip – GARE-ICMS" for the payment of the complementary fraction, in case of partial settlement; and (v) "State Collection Slip – GARE – ICMS" for the payment of attorneys' fees.

In addition, after recording the accumulated credit, the Taxpayer must submit to the connected Tax Office a "Request for the Settlement of Installments of PEP with Accumulated Credit " and the payment receipts: (i) of the complementary fraction, in case of partial settlement of the debt in a single installment; and (iii) of the attorneys' fees, court and other legal costs. This should be done within 5 (five) business days at most, as of the date the accumulated credit was recorded (item III of article 10) or the due date of the GARE relative to the complementary fraction and/or attorneys' fees, if any, under penalty of the accumulated credit record being disregarded.

The Regional Tax Office will decide on the request until the last business day of the month following the record of the accumulated credit in the ICMS PEP system, and the decision that approves, dismisses, or ratifies the waiver of the request to settle the PEP installments with accumulated credit, rendered in the proceeding, will be sent to the Tax Collection Unit of the respective Regional Tax Office, which, within 5 (five) days as of the decision, will record the information in the Collectible Debts System, there being no time estimate for an appeal against this decision.

In case the request to settle the tax debt with accumulated credit is denied, the taxpayer will be notified about the decision by the Tax Collection Unit and the amount of accumulated credit reserve that is not used will be recorded as credit into the ECredAc System's bank account.

Lastly, the statement of tax debt settlement, recorded as collectible or not, will be made through a report of written off debts generated by the ICMS PEP system, Regional Tax Offices, relative to debts not recorded as collectible, or by the State Attorney General responsible for following up on the judicial actions related to tax matters, within their functional jurisdictions, in case of tax debts recorded as collectible by the government.

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.