Brazil: Law no. 14,689/2023 – the return of the tie-breaking rule in favor of the Tax authorities at the administrative level (CARF)

• 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 up to 12 months;
• 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 qualified penalty (for fraud or simulation cases) was reduce to 100%, but it still may be increased to 150% in case of recidivism;
• 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 presentation of a guarantee in Tax Collection Lawsuits for credits resolved in favor of the Federal Treasury by the tie breaking vote will not be increased by 20% of legal fees as well as will be waived for taxpayers with good payment capacity and provided that the clearance debt certificate has not been invalid for more than 3 months during the past 12 months, which may only be executed after a final decision.

The main points vetoed by the President of the Republic were:

• Resolution of disputes between the Tax Authorities and the Regulatory Body by the Federal Public Administration Mediation and Conciliation Chamber (CCAF);
• The regulation of transactions by PGFN with no less benefits for other cases;
• Authorization for the debtor capable of obtaining insurance or bank guarantee to offer guarantee, only for the updated principal value, as well as prohibition of the execution before the final decision;
• The obligation of the Federal Revenue to provide preventive methods of self-regulation; reduction of the official fine by at least 1/3 and the late payment fine by 50%, cumulative application of discounts with the reduction of the official fine and reduction of 1/3 of the official fine in cases of excusable error, divergence of interpretation and market practices;
• Full reimbursement of expenses by the Public Treasury in case of final decision favorable to the debtor;
• The unique and individualized qualification of the fine and removal of the fine (for inspection situations) in cases where the taxpayer has not tried to omit the facts, relief of the fine according to the taxpayer’s history;
• The ex officio cancellation of fines exceeding 100% of the tax by the PGFN and the possibility of refunding the value of fines paid in the past.

These vetoed points may still be re-analyzed by the National Congress, in a joint session of the Chamber and Senate, with no data yet scheduled. In other words, these vetoes can be overturned by a majority vote in each House, which would result in the text of the Law being complemented by these vetoed points.