Keywords: Program for Reduction of Tax Litigation, PRORELIT, tax debts

Provisional Measure No. 685/2015, which, among other measures, established the Program for Reduction of Tax Litigation ("PRORELIT"), was published on July 22, 2015.

PRORELIT allows the payment of tax debts that fell due by June 30, 2015, and were being discussed in administrative and judicial proceedings, including those with deposits in court, by setting the debts off against credits derived from accumulated tax losses accrued until December 31st, 2013, and reported to Brazilian Tax Revenue Office by June 30th, 2015.

After fully using their own credits derived from accumulated tax losses, applicants can use the tax losses carried forward by (i) directly or indirectly controlling and controlled entities; (ii) entities directly or indirectly controlled by the same company; and (iii) entities that were the obligors or co-obligors of the relevant tax credit discussed in administrative or legal proceedings.

In order to benefit from PRORELIT, a legal entity is required to make a cash payment of at least 43% (forty three percent) of the consolidated debt, whereas the outstanding balance can be paid with the use of credits derived from accumulated taxes losses.

Both the application to participate in the PRORELIT and the payment have to be made by September 30, 2015.

Finally, we highlight that the PRORELIT program does not include debts already subject to installment payment programs, even where a legal entity's participation in the program has already been terminated.

Observations in this update about Brazilian law are by Tauil & Chequer Advogados. They are not intended to provide legal advice to any entity; any entity considering the possibility of a transaction must seek advice tailored to its particular circumstances.

Originally published 23 July 2015

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Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."

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This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.