Zero Litigation: companies and individuals can renegotiate debt – 01/18/2023 – Market

Launched on January 12 by the Ministry of Finance, the Litigation Zero program, officially called the PRLF (Program for the Reduction of Tax Litigation), provides for the renegotiation of debts of individuals and companies, with discounts and a period of up to 12 months for payment.

Adhesion to the program must be made from 8 am on February 1, 2023 until 7 pm on March 31, 2023, according to a joint ordinance of the Federal Revenue Service and the National Treasury.

Tax debts under discussion within the scope of the DRJ (Federal Revenue Judgment Offices), the Carf (Administrative Council of Tax Appeals) or small debts in administrative litigation or registered in overdue debt of the Union.

For individuals, micro and small companies, the discount will be 40% to 50% of the total amount of the debt, including the tax that originated the liability, in addition to interest and fine, for debts of up to 60 minimum wages (R$ 78,120).

In the case of debts above 60 minimum wages, the discount is up to 100% on the amount of interest and fines, in the case of irrecoverable or difficult to recover amounts. The government will still allow the use of tax losses and a negative calculation base to settle 52% to 70% of the debt.

In all cases, the effective discount percentage will observe the taxpayer’s ability to pay.

The debts that fall into this category represent more than 30,000 processes at Carf, with a total value of more than R$720 million. At the Federal Revenue Police Stations, there are more than 170,000 processes, totaling almost R$ 1 billion, according to the Ministry of Finance.

The government estimates that it will obtain R$ 35 billion in extraordinary revenues. There would also be a permanent gain of R$ 15 billion by reducing conflicts.

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PRLF (Tax Litigation Reduction Program)

Who can join?
Individuals and companies with tax debts under discussion within the Judgment Offices of the Federal Revenue Service, the Administrative Council of Tax Appeals or low-value debts in administrative litigation or registered in overdue debt of the Federal Government

Deadline
From 8 am on February 1, 2023 to 7 pm on March 31, 2023

Accession
By opening a digital process on the e-CAC portal

Documents

• Membership application available in the e-CAC duly completed
• Proof of payment of the initial installment
• If applicable, certification issued by an accounting professional regarding the existence and regularity of credits arising from tax losses and negative CSLL calculation basis, in the form of a specific form available on e-CAC

Step by step

• The digital process must be opened by selecting the “Tax Transaction” option in the Service Concentration Area field, and then selecting the service “Transaction by Membership in the Tax Litigation Reduction Program – PRLF”;
• The taxpayer must adhere to the DTE (Electronic Tax Domicile) for implementation by the Revenue Service of an electronic address for sending communications;
• The submitted application for adhesion suspends the processing of tax administrative processes related to the debts included in the transaction while the application is under analysis;
• If the documentation is incomplete, the taxpayer will be summoned to, within a period of ten days, correct the identified failure

Extinction of litigation
The formalization of the transaction agreement constitutes the recognition by the taxpayer of the debts, with the extinction of the administrative dispute to which it refers

installment
Whichever payment method is chosen, the minimum installment amount will be BRL 100 for individuals, BRL 300 for micro or small businesses, and BRL 500 for other legal entities.

Correction
The value of each installment will be increased by interest equivalent to the Selic (basic interest rate), up to the month prior to the payment, and 1% for the month in which the payment is made.

Modalities
The following may be settled under the PRLF:

Credits classified as irrecoverable or difficult to recover:

• With a reduction of up to 100% in the amount of interest and fines, observing the limit of up to 65% on the total amount of each credit subject to negotiation
• At least 30% of the outstanding balance paid in cash, in up to nine monthly and successive installments; and the remainder using credits arising from tax loss and CSLL negative calculation base calculated up to December 31, 2021

Loans classified with high or medium recovery prospects

• Upon payment of at least 48% of the consolidated amount of the transacted credits, in nine monthly and successive installments; and the remainder of the outstanding balance using credits arising from tax loss and negative CSLL calculation base calculated up to December 31, 2021

Entry value
The equivalent of 4% of the consolidated amount of traded credits, in up to four monthly and successive installments, and the remainder paid with a reduction of up to 100% in interest and fines, observing the limit of up to:

• 65% of the total amount of each credit object of negotiation, in up to two monthly and successive installments;
• 50% of the total amount of each credit object of the negotiation, in up to eight monthly and successive installments;

reduced percentages
The above percentages will be up to 70% and 55%, respectively, for individuals, micro-enterprises, small businesses, Santas Casas de Misericórdia, cooperative societies and other civil society organizations dealt with in Law No. 13,019, of July 31 2014, or educational institutions

Small amount litigation

For debts of up to 60 minimum wages (R$ 78,120), referring to individuals, micro and small companies, the discount will be 40% to 50% of the total debt, including the tax that originated the liability, in addition to interest and fine

Regardless of the payment capacity or debt classification, these credits may be negotiated upon payment, as a down payment, of 4% of the consolidated value of the transacted credits, in up to four monthly and successive installments

The rest will be paid:

• within two months, with a 50% reduction, including the principal amount of the credit; or
• in up to eight months, with a 40% reduction, including the principal amount of the credit

The discounts also apply to credits registered in the Union’s overdue debt for more than one year, through the PGFN’s Regulariza program (www.regularize.pgfn.gov.br)

Termination or opposition
Failure to pay the down payment in full implies the cancellation of the transaction request. Non-payment of three consecutive or alternate installments of the outstanding balance leads to termination of the transaction

Precatories
The program provides for the possibility of using net and certain credits owed by the Union, its municipalities and public foundations, own or acquired from third parties, resulting from final and unappealable decisions for discharge or amortization of the outstanding balance of the transaction

Source: Joint Ordinance RFB/PGFN No. 1, of 01/12/2023

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Changes in Carf

The program also includes three other points. The first is the increase from 60 to 1,000 minimum wages in the value of the processes that can be analyzed by the Carf (Administrative Council of Tax Appeals). The others will be processed by the Federal Revenue Judgment Offices in the first and second instances.

The change should reduce by 72% the number of processes sent to the council and which represent less than 2% of the total amount under discussion in the body where the Tax Authorities and taxpayers discuss the assessments of the Revenue. The objective is to accelerate the analysis of high value cases in CARF.

Another measure, the return of the Treasury’s casting vote in this body, may give victory to the Union in several of these disputes. The previous rule determined that, in case of a tie, the decision was favorable to the taxpayer.

According to the Treasury, the end of ex-officio appeals for values ​​below R$ 15 million was also announced, which means the automatic extinction of almost 1,000 processes that are now in Carf and add up to almost R$ 6 billion.