In light of the effects of the coronavirus pandemic in Brazil, early in March the Brazilian National Congress recognized the state of national calamity with effects until December 31, 2020. Since then, the Federal Government and the Congress have adopted a series of measures in different fields aiming at reducing social and economic impacts resulting from the COVID-19 situation.
In the tax scenario, these measures purport a relief to taxpayers in the setbacks of the calamity – a few of them consisting of the suspension of federal tax procedures, the postponement of some deadlines for tax payment, the suspension of federal tax executions and the validation of tax clearance certificates for ninety days. A regulation for the implementation of tax negotiation with the Revenue Service was swiftly approved.
More recently, the Federal Government provisionally reduced to zero IOF Financial tax rates applicable to all credit transactions in Brazil. In addition, the import tax rates on healthcare products until September 30, 2020 were reduced to zero in an attempt to quickly avoid the spread of the virus – in addition to providing tax exemption on industrialized products (IPI) and facilitating the importation procedures for these products.
Specific local measures were also set up by some States. In Rio de Janeiro, for instance, the State Government extended deadlines for tax debt payment to sixty days included in installment programs and suspended ongoing administrative proceedings for fifteen days. Furthermore, the State of São Paulo determined a ninety-day suspension of certain tax executions registered as an overdue liability (dívida ativa).
Measures are, however, still uneven among the twenty-six States, and even less uniform among the more than 5,000 Brazilian cities. Even at the federal level, other actions are still needed – e.g., deferment of other tax payments is the key request in the market.
This scenario causes uncertainty to taxpayers, who have often found themselves with specific issues in different locations.
Aiming at preventing negative tax effects in corporate activities – and in most cases enabling cash generation –, the market has considered discussions and dispute resolutions claiming the following guarantees:
- suspension of time limits in administrative proceedings in States and Municipalities that have not yet provided it;
- suspension of penalties and interest due to the late payment of taxes and non-compliance with ancillary obligations;
- exemption of urban real estate tax (IPTU) during restrictions of activities of commercial establishments;
- suspension of taxes levied on worker’s compensation during the quarantine;
- withdrawal of monetary deposits in court and/or their replacement by other types of guarantee;
- review of profit-sharing plans (PLR) and short/long term incentives for executives;
- wide acceptance of essential and necessary inputs for contributions on profits (PIS/COFINS) due to the current context;
- tax exemption on products and services indirectly related to COVID-19;
- offset withholding taxes (income tax – IRRF and tax on financial transactions – IOF) in the restitution of financial investments with other tax credits;
- exemptions of companies from issuing work-related accident reports (CAT) as the majority of them remain closed, and not accepting COVID-19 as a factor to affect the accident prevention factors (FAP) as it is not related to any labor activity;
- suspension of enforceability of tax debts registered as an overdue tax liability; and
- the right to offset credits from periods prior to e-Social arising from lawsuits concerning social security tax debts related to periods after enforceability of the e-Social. Applying, therefore, a less restrictive interpretation on the current rules.
It is worth noting that if on the one hand items may add to the list above as the crisis develops, it is expected that all levels of the government system (federal, state, and municipal), on the other hand, are attentive to demands to minimize market losses. At this point, all measures are dynamic and will tend to vary in time.
