COVID-19 coping measures should prevent the application of tax fines

As is well known, the federal government and the states have declared a public health emergency and have been adopting measures to prevent infection and cope with the spread of COVID-19. The measures aim to encourage isolation among the population to try to contain the pandemic.

Faced with the declared public health emergency, many companies have adopted work from home arrangements for their employees. However, such measures often hinder or even impair compliance with the main and ancillary tax obligations, whether due to reduced personnel, the lack of remote access to systems, or the absence of safety standards to protect the data of the taxpayer, its customers and its employees.

Therefore, it is likely that the delay or even non-compliance with these obligations will be questioned  by the tax authorities and will be meted with severe penalties to taxpayers who are simply trying to comply with the preventive measures and cope with the COVID-19 global pandemic, as required by the government itself.

Despite non-compliance with tax obligations being punishable regardless of taxpayer fault (CTN, art. 136), the jurisprudence of the Superior Courts has ruled that force majeure situations may exclude liability, including tax.

Some countries like China have recognized the pandemic as a force majeure event. In Brazil, although the discussion is still at its early stages, the determinations and effects arising from the State of Emergency enacted by some states in Brazil – and which may become even more rigid to contain the pandemic – may be used for this characterization.

Therefore, we believe it is possible that these assessments will be questioned in court, provided that the current situation may be characterized as an unforeseeable circumstance or force majeure, depending on the measures adopted by the state and the taxpayer’s own situation, showing that non-compliance with the tax obligations was inevitable in the face of the established pandemic and the measures imposed by the public powers.

In  this  sense,  we  are  available  to  assist  our  clients,  preventatively  and  reactively,  if  they    find
themselves in this situation.