Brazil allows taxpayers to settle certain debts from the tax regime preceding Law No. 12,973/2014

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05 May 2022

Taxpayers may enter into a settlement agreement for outstanding debts resulting from the amortization of goodwill under the tax regime preceding Law 12,973/2014. Before entering into a settlement agreement, taxpayers should consider the tax, accounting and financial implications.

The Brazilian Office of the General Counsel for the National Treasury (PGFN) published, on 3 May 2022, Public Notice 9/2022, which allows taxpayers to settle debts arising from the amortization of goodwill under the tax regime preceding Law No. 12,973/2014.

According to the Public Notice, taxpayers may settle debts (regardless of whether they are registered as overdue federal tax liabilities, including suspended liabilities) that are pending in administrative adjudication or judicial litigation as of 3 May 2022. The Public Notice also applies to cases involving the addition of goodwill amortization expenses to the calculation of the social contribution on net profit. The settlement agreement must cover all the debts that the taxpayer has outstanding as a result of the amortization of goodwill.

Taxpayers have until 29 July 2022, to enter into a settlement agreement. As part of the settlement, the taxpayers agree to have their cases withdrawn from administrative or judicial proceedings.

Under the settlement agreement, taxpayers may choose one of the three methods to pay off their tax liability:

50% reduction of the principal, fines, interest and other charges - Pay 5% of the total debt or amount eligible for settlement, without reductions, divided into five successive monthly installments, with the remainder paid over seven months

40% reduction of the principal, fines, interest and other charges - Pay 5% of the total debt or amount eligible for settlement, without reductions, divided into five successive monthly installments, with the remainder paid over 31 months

30% reduction of the principal, fines, interest and other charges – Pay 5% of the total debt amount or amount eligible for settlement, without reductions, divided into five successive monthly installments, with the remainder paid over 55 months

When determining whether to enter into a tax settlement, taxpayers must take tax, accounting and financial aspects into consideration.

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For additional information with respect to this Alert, please contact the following:

EY Assessoria Empresarial Ltda, São Paulo

Bernardo Maltz | bernardo.maltz@br.ey.com

Rodrigo Munhoz | rodrigo.munhoz@br.ey.com

Ademir S. Bernardo | ademir.bernardo@br.ey.com

Patricia Canhadas | patricia.canhadas@br.ey.com

Gustavo Carmona | gustavo.carmona@br.ey.com

Ernst & Young LLP (United States), Latin American Business Center, New York

Lucas Moreno | lucas.moreno@ey.com

Pablo Wejcman | pablo.wejcman@ey.com