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Brazil

Last Verified on Tuesday 13th August 2019

    • Brazil

      In Brazil, there are state, municipal and federal taxes, according to the authority given to each by the Federal Constitution. The competent authorities are the Municipal Treasury (City Hall of each municipality), for municipal taxes; the State Office of Finance of each state for state taxes; and the federal government creates federal taxes and the Brazilian Federal Revenue administers them.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      There are several ways to start proceedings involving tax disputes.

      One is the initiation by an audit by the competent authority. If there are tax irregularities, the audit draws a notice of deficiency against the taxpayer being audited. In view of this notice of deficiency, it is possible for taxpayers to start an administrative level proceeding and, after its conclusion, if they lose the case, to file actions to discuss the notice of deficiency in judicial courts. The actions are action for annulment of tax debt, or other similar ones (stay of execution or, depending on the case circumstances, a suit for a writ of mandamus).

      Although the discussion at the administrative level is pending, the enforceability of the credit is suspended, which means that there can be no registration of the debt in an overdue tax liability nor can tax execution be filed seeking to collect the tax debt.

      Upon termination of the administrative proceeding, if the dispute continues in the judicial courts, the debt will be enforceable unless the full amount is deposited or an injunction or early relief is granted in a specific legal action. Once the debt is registered as an overdue tax debt, the tax execution is filed, and taxpayers may defend themselves via stays of tax execution. 

      In addition, there is also the writ of mandamus, which is a faster measure and aims to ensure certain rights of taxpayers. The writ of mandamus may be repressive when filed against a coercive act; or preventive, if filed when a coercive act is about to happen. In this last case, there is a justifiable fear that the taxpayer may suffer violation of liquidated and certain right by the defending authority. However, in the writ of mandamus, the judge must take cognisance of the matter under discussion. When taxpayers seek to discuss something that requires analysis of evidence, they must file an ordinary action (the most common ones are actions for annulment, mentioned above, or declaratory judgement action), by means of which it is possible to introduce evidence by an expert appointed by the court.

      Normally, in these actions in which taxation is discussed (writ of mandamus or ordinary actions, also including stays of tax execution), taxpayer requests the court to declare the inexistence of legal-tax relation that obliges them to be subject to certain taxation, and consequently, the restitution of the amounts paid in the five years prior to the filing of the measure.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      There is no conciliation and arbitration for tax matters.

      There is, however, the possibility of ordinary/extraordinary payment plans, in many cases at reduced interest rates and fines. Payment plans depend on specific laws.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      In the case of judgments given by lower-court judges, an appeal may be filed at the Court of Appeals.

      Against appellate decisions issued by the Courts of Appeal (Courts of Justice or Federal Regional Courts) appeals to the Superior Court of Justice (SCJ) and extraordinary appeal to the Federal Supreme Court (FSC) are applicable.

      However, these appeals, before being sent to the Superior Court of Justice and the Federal Supreme Court and, are subject to a prior admissibility decision at the court of origin that issued the appellate decision. If the appeal is admitted, it will be sent to the Superior Court of Justice and to the Federal Supreme Court. Otherwise, in view of the decision against the admissibility of the appeals, interlocutory appeals may be filed, which will be directly reviewed by SCJ or the FSC. If the appeals are not entertained by a monocratic decision in the SCJ or FSC, respectively, internal appeals may be filed and the full court will decide on the appeal.

       

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      Yes, the discovery process in tax litigation is the same for judicial litigation in general, as it follows the provisions of the Code of Civil Procedure.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      Both Brazilian Bar Association Act and the Federal Constitution ensure attorneys' acts and documents, as long as they relate to the practice of the profession, are protected and confidential. Therefore, if some kind of document is prepared for the client (a legal opinion, for example), tax authorities may not demand it be presented, under penalty of breach of attorney-client confidentiality.

      This protection only relates to attorneys, and does not extend to accountants or other professionals.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      The Federal Constitution provides that adversarial proceedings and an opportunity to be heard are ensured to parties in a legal matter, in judicial or administrative proceedings, and to defendants in general, with all inherent means and remedies(article 5, LV), which applies to all administrative and judicial proceedings.

      However, the procedure applicable to administrative proceedings is different from judicial proceedings. The federal administrative proceeding, for example, follows the provisions of Decree No. 70,235/1972. With respect to other jurisdictions (state and municipal) the procedures applicable to administrative proceedings vary.

      Judicial processes, regardless of their tax nature, follow, in principle, the provisions of the Code of Civil Procedure, which provides for time limits, appropriate remedies, evidence and all issues that may involve the judicial process. The Law on Tax Executions (Law No. 6,830/80) applies to tax executions and Law No. 12,016/2009 to the suit for a writ of mandamus. That is, the general rule applicable to court proceedings is the Code of Civil Procedure and, in case of special procedures such as tax executions and writ of mandamus, specific laws apply together with the Code of Civil Procedure.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      Although not common, hearing witnesses is possible (production of witness evidence) under tax law. 

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      Yes. According to the initial articles of Law No. 8,137/90, it is a crime against the tax order to suppress or reduce tax, or social contribution and any accessory, by practising any of the following: 

      • omitting information, or giving a false statement to tax authorities;
      • commit fraud in tax audits, inserting inaccurate elements, or omitting transactions of any nature, in a document or book required by tax law;
      • falsifying or changing invoice, duplicate invoices, sales notes, or any other document related to the taxable transaction;
      • preparing, distributing, supplying, issuing or using document that the person knows or should know to be false or inaccurate;
      • denying or failing to provide, when required, invoice or equivalent document, regarding the sale of goods or rendering of service effectively carried out, or providing it in disagreement with the legislation. Failure to comply with the requirement of the authority within 10 days, which may be converted to hours according to a greater or lesser complexity of the matter or the difficulty in meeting the requirement, is an infraction.

      In these cases, the penalty will be imprisonment for two to five years and fine. In addition, the following are also crimes, punishable by detention from six months to two years, and a fine:

      • make a misrepresentation or omit returns or statement about income, property or facts, or employ other fraud, not to pay taxes, totally or partially;
      • fail to collect, within the time limit, the amount of tax or social contribution, discounted or charged, as a taxable person, that should be paid to the public treasury;
      • require, pay or receive, for themselves or for the beneficiary taxpayer, any percentage of the deductible or deducted portion of tax or contribution as a tax incentive;
      • fail to apply, or apply in disagreement with the provisions, tax incentive or tax instalments released by a development agency or entity;
      • use or disclose a data processing programme that enables the taxpayer to have accounting information other than that provided by law to the Treasury.

      Article 3 of the same law also mentions that the following are crimes against the tax order, in addition to those provided for in the Criminal Code:

      • misappropriating an official book, tax process or any document in one's possession because of one's duties; evade it or render it totally or partially useless, resulting in improper or inexact payment of tax or social contribution;
      • demanding, soliciting or receiving improper advantage, for themselves or others, directly or indirectly, even if outside the position or before taking office, but because of it; or accepting a promise of such advantage, to fail to assess or collect tax or social contribution, or to charge them in part. Penalty – imprisonment from three to eight years and a fine.
      • sponsoring, directly or indirectly, a private interest before the Treasury, taking advantage of the status of civil servant. Penalty – imprisonment of one to four years and a fine.

      In the crimes defined above, the fine set is between 10 and 360 penalty days, as necessary and sufficient for reprobation and prevention of the crime. The fine will be set by the judge in an amount not smaller than 14 nor larger than 200 National Treasury Bonds.

      Therefore, if any of these crimes against the tax order is committed by the tax authority, criminal charges will be pressed by the Prosecution Office to that criminal prosecution.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      Once established by the competent authority that the tax has been reduced or suppressed, and this relates to one of the conducts classified as a crime against the tax order, it is possible, at least in principle, to start criminal proceedings, provided that the tax liability has been definitively assessed.

      This is because, after being assessed by the authority, the tax liability may still be quashed at the administrative level and its definitive assessment will only occur when all administrative instances and all applicable appeals are exhausted. That is, one can only speak of a crime against the tax order after all the administrative instances in which the taxpayer disputes the tax assessment are gone through.

      Once the assessment has been made, the taxpayer has been regularly notified and after all time limits have ended and all applicable appeals have been used, the tax liability will be definitively assessed. After this definitive tax liability assessment, the Prosecution Office may file a complaint and prosecute the criminal action and the competent authority may file a tax execution to collect the tax credit in court.

      In this case, the criminal action will be dealt with in the criminal court, that is, specialising in criminal matters; while the tax execution will be processed in common or federal courts, depending on the tax required.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      In lower courts, there are usually:

      • the Public Treasury courts (which receive claims related to state and municipal taxes);
      • the tax execution courts (municipal, state and federal); and
      • federal courts (which receive federal tax claims). 

      In the higher courts, the appellate courts (in their chambers of public law) analyse the matters related to state and municipal taxes. With respect to federal taxes, these matters are reviewed by the federal regional courts. 

      Lastly, there are the Superior Courts (STF and STJ), where there is no difference between taxes, but rather about the matter discussed in the case, whether constitutional or non-constitutional.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      Considering that the Tax Authorities can only do what is provided by law, not only do they have the burden of proof as it relates to the legal fact or the tax violation that supports their acts, but also the respective legal and constitutional obligation.

      Given that in the tax sphere acts are performed by the Tax Authorities, such acts are presumed to be relatively (not absolutely) valid, insofar as the act performed by the tax authorities is presumed to be true only until the taxpayer proves otherwise.

      At the judicial level, in turn, the situation is reversed: as a rule, the taxpayer must prove the amending or extinguishing fact of the tax liability assessed.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      Yes, if the taxpayer has wrongly paid any tax and is successful in a claim involving this payment, interest on late payment and adjustment for inflation will be due. Adjustment for inflation is calculated as from the time payment was made improperly (Precedent 162/STJ) and the interest for late payment from the date on which the decision determining the recovery is certified to be unappealable (Precedent 188/STJ and article 167, sole paragraph, of CTN). The applicable fee depends on the tax to be refunded: whether municipal, state or federal. However, the SELIC rate is usually used, which is the rate used by the federal government to adjust undue tax liability.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      It is incumbent upon the President of the Republic, pursuant to article 84, VIII, of the Federal Constitution, "to enter into international treaties, conventions and acts, subject to referendum by the National Congress". 

      After the treaty is executed, approved by Congress and promulgated by the President of the Republic, with its publication in the Federal Register, the treaty becomes a part of national laws. Such treaties enter the legal system as non-constitutional acts, in the same hierarchy as ordinary laws, fully subordinated to constitutional provisions.

      However, there are cases of conflict between national provisions and international treaty. Article 98 of the National Tax Code establishes the hierarchical superiority of the treaty against domestic laws.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      The Federal Constitution establishes tax non-retroactivity, stating that the federal government, the States, the Federal District and the municipalities are not allowed to charge taxes in relation to taxable events that occurred before the law that created or increased them has come into effect.

      However, the National Tax Code, in its article 106, brings an exception regarding penalties, which can be applied retroactively. For example, if in 2015 the fine was 20 per cent and in 2016 it was 15 per cent, the fine imposed in 2016 may be applied in relation to the taxable event of 2015.

      It should be noted, however, that the rule will only be retroactive in cases of penalty and, furthermore, it is necessary that such penalties be under appeal or not yet been paid.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      In the tax area, there is the peremption, which is the loss of the Tax Authority’s right to assess the tax liability after five years as from the taxable event or from the first day of the fiscal year following the one in which the assessment could have been made.

      The statute of limitations, which is the right of the tax authorities to file a lawsuit for the collection of the tax liability, is five years from the date the tax liability has been definitively assessed. The lawsuit used by the Treasury to collect tax liabilities is tax execution (municipal, state or federal tax).

      Note that the peremption period begins starts from the moment the right is born; while the statute of limitations as from the moment the right is violated, threatened or disrespected.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

    • Brazil

      In Brazil, the vast majority of discussions involving non-income taxes relate to PIS and COFINS, which are levied on taxpayers’ income. However, there are two types of tax collection schemes, the cumulative and the non-cumulative system; the largest discussion regards the non-cumulative system, in view of the discussions on the use of tax liability.

      In addition, currently, in view of the judgment by the Federal Supreme Court with stare decisis status, that ICMS (similar to VAT) is not part of the tax basis of PIS and COFINS, there are many lawsuits involving the subject.

      Lastly, it is worth mentioning also the discussions involving ICMS, which is a tax levied on the circulation of goods and services, and which generates a lot of discussion, considering the issues involving Credit, as well as tax benefits granted by some states and not recognised by the state of destination of the goods.

      Answer contributed by Igor Souza from Madrona Advogados

      Last verified on Tuesday 13th August 2019

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