On 05.01.2017, the Diário Oficial da União (Official Federal Gazette) published Provisional Measure (PM) No. 766 introducing a Tax Regularisation Program (“TRP”) under the jurisdiction of the Secretaria da Receita Federal do Brasil (Brazilian Federal Revenue Secretariat, hereinafter referred to as the “RFB”) and the Procuradoria Geral da Fazenda Nacional (Office of the Brazilian Attorney General – “PGFN”).

Both private individuals and companies may include in the TRP payables overdue up to 30 November 2016, regardless of whether or not they are tax-related or whether they are under administrative court or judicial court discussion. These also include officially recognised payables occurring subsequent to the date of this PM, and the possibility of including payables that were being paid under a rescinded or current instalment system.

Eligibility for this PM requires an application to be submitted within one hundred and twenty (120) days. This time limit will commence after PM No. 766/2017 has been regulated by RFB and PGFN; it is expected to be published at the beginning of February.

In the case of debts under RFB jurisdiction, the indebted party that opts for the TRP system may select one of the following payment options:

i) Twenty percent (20%) of the amount of the consolidated debt paid in full and in cash. Under this system, it is possible to settle the outstanding balance through offset against credits arising from corporate income tax and CSLL (Contribuição Social sobre o Lucro Líquido, Social Contribution on Revenues) losses or of other credits relating to taxes under RFB jurisdiction.

ii) Twenty-four percent (24%) of the amount of the consolidated debt paid in cash in twenty-four (24) monthly and successive instalments. Under this system, it is possible to settle the outstanding balance through offset against corporate income tax and CSLL losses or of other credits relating to taxes under RFB jurisdiction.

iii) Twenty percent (20%) of the amount of the consolidated debt paid in cash, and the outstanding balance payable in up to ninety-six (96) monthly and successive instalments.

iv) Payment of the consolidated debt in up to one hundred and twenty (120) monthly and successive instalments, with due regard for the minimum payment percentages applied to the consolidated debt, pursuant to this PM.

Corporate income tax and social contribution losses up to 31 December 2015, and reported by 30 June 2016, may be utilized.

In the case of debts under PGFN jurisdiction, the indebted party that opts for the TRP system may select one of the following payment options:

i) Twenty percent (20%) of the amount of the consolidated debt paid in full and in cash, and the outstanding balance payable in up to ninety-six (96) monthly and successive instalments.

ii) Payment of the consolidated debt in up to one hundred and twenty (120) monthly and successive instalments, with due regard for the minimum payment percentages applied to the consolidated debt, pursuant to this PM.

In the PGFN scenario, there will be a requirement to present a letter of guarantee or surety bond for the instalment payment of debts in a consolidated amount equal to, or greater than, fifteen million reais (R$ 15.000.000).

A taxpayer seeking to include in the TRP debts under administrative court or judicial court discussion should first withdraw from such cases.

The following taxpayers with an acknowledged outstanding debt, which has not yet been paid, shall be excluded from the TRP, in addition to the automatic execution of the guarantees:

i) Those that fail to pay three (3) consecutive, or six (6) alternate instalments.

ii) Those that fail to pay one instalment, if all others have been paid,

iii) Those that carry out any act that reduces their assets to fraudulently avoid payment of the instalments, should such practice be identified by the RFB or PGFN;

iv) Those that have been declared bankrupt or extinguished by liquidation;

v) Those that have received a tax injunction in the PGFN’s favour, pursuant to the terms of Law No. 8.397/1992;

vi) Companies that have been deemed ineligible for the CNPJ (Cadastro Nacional da Pessoa Jurídica, Corporate Taxpayers’ Registry), pursuant to articles 80 and 81, of Law No. 9.430/1996;

vii) Those that have failed to pay taxes overdue up to 30 November 2016, and failed to regularly meet their commitments to the FGTS (Fundo de Garantia do Tempo de Serviço, Government Severance Indemnity Fund for Employees).

If you require further information, please contact the Tess Advogados tax team.

São Paulo, 10 January 2017.

Tax Department

Luis Augusto Gomes
lgomes@tesslaw.com

Davi Naves Grave
dgrave@tesslaw.com