Brazil: Senate approves the return of the tie-breaking rule in favor of the Tax authorities at the administrative level (CARF)

In brief

We inform you that on August 30, 2023 (Wednesday), the Bill No. 2,384/2023 was approved, with the purpose of disciplining the proclamation of judgment results in the event of a tie vote within the scope of the Administrative Council of Tax Appeals (CARF), among other measures connected to tax litigation and the transaction in the collection of credits by the Federal Treasury.

More Details

With the approval of the Bill, the President of the Republic has 15 days to sanction or veto the text.

The approved text has as main points:

• The maintenance of the tie breaking vote by the presiding Counselor of the Panel (Representative of the Tax Authorities) in the event of a tied judgment in CARF (§ 9 of art. 25 of Decree No. 70,235/1972);
• The exclusion of fines and cancellation of tax representation for criminal purposes, in the event of a judgment in a tax administrative proceeding resolved in favor of the Public Treasury by a tie breaking vote;
• The exclusion of interest on arrears until the date of the agreement for payment in the event of a judgment of a tax administrative proceeding resolved in favor of the Federal Treasury by a tie breaking vote if there is an effective manifestation of the taxpayer to pay the debt within 90 days;
• The possibility of concluding a specific tax transaction agreement, at the initiative of the taxpayer, for credits that are registered as active debt of the Union and have been resolved by the tie breaking vote, including the payment with the use of NOLs and judicial credits;
• The application of a fine of 150% will only occur in cases of recidivism, and the qualified isolated fine, provided for in Law No. 9,430/1996, has been reduced to 100%;
• The cancellation of the portion of ex-officio fines imposed at the federal level that exceed the limit of 100% of the amount of the tax due, even if included in a refinancing program;
• The need for Federal Revenue offices to observe the precedents and decisions issued by CARF, as well as it is allowed to present oral arguments at the first level chamber (DRJ);
• The creation of a Mediation and Conciliation Chamber of the Federal Public Administration (CCAF) to act in cases of determination and demand of tax credit or application of isolated penalty involving operation or activity previously authorized by a regulatory body;
• The presentation of a guarantee in Tax Collection Lawsuits for credits resolved in favor of the Federal Treasury by the tie breaking vote will be waived for taxpayers with good payment capacity;
• Possibility of offering guarantee in Tax Collection Lawsuit only to the principal amount of the debt, provided that certain requirements are met.