COVID-19 – Compliance with tax obligations
Because of the crisis risen by the COVID-19 pandemic, there is general concern about compliance with tax obligations. So far, there are emergency rules issued by the Brazilians IRS and National Treasury Attorney’s Office as well other tax administration entities, but there is no general rule postponing the due date of taxes or the filing of tax returns.
Lefosse has been recommending its clients to make a structured and careful analysis of the administrative and preventive judicial measures that may lead to the postponement of tax payment, reduction of amounts to be collected or use of tax credits.
We summarize below some measures that may be considered at the judicial and administrative spheres, aiming at reducing the impact of tax obligations at this time of crisis:
Postponement of the maturity of federal taxes. Ordinance no. 12/2012 extended the due date of federal taxes in case of public calamities. Considering that there is a state of public calamity decreed at the Federal and State levels (e.g., São Paulo and Rio de Janeiro), it would be possible to judicially invoke this Ordinance if the Federal Government does not take any action to expressly extend the due dates of taxes. There is case law cancelling penalties and default surcharges in cases of non compliance with tax obligations due to unforeseeable cause, which can be used to reinforce or as a subsidiary request in the postponement claim.
Use of the IRPJ/CSLL credits before the delivery of the ECF. The offsetting rule prohibits the use of Corporate Tax (“IRPJ/CSLL”) credits before the delivery of the tax return (“ECF”). As this return is usually delivered on July 31st (which can be postponed due to the current situation with the COVID-19 pandemic), the taxpayer is unable to use its credits for some months. There are legal arguments to claim the use of the negative balance of IRPJ/CSLL for offsetting federal taxes before the delivery of ECF.
Substitution of judicial deposits by offering a bank guarantee or insurance-guarantee. In general, requests for the withdrawal of deposits before the res judicata of tax lawsuits are not accepted, even if it is substituted by another guarantee. However, the current crisis may serve as basis for claims for the replacement of judicial deposits by bank guarantee or insurance-guarantee (especially in the case of writs of mandamus or ordinary actions).
Review of tax opportunities. There are tax and social security cases with favorable case law, that may allow opportunities with few risks to taxpayers. In a crisis scenario, we recommend a review of these cases vis a vis the company’s internal tax procedures, aiming at identifying possible opportunities. In this aspect, it is worth mentioning the analysis of Social Integration’s tax and Social Security’ tax (“PIS/COFINS”) credits related to inputs considered essential or relevant to the company’s activities, including those incurred due to the COVID-19 crisis.
Review of incentive plans and profit sharing agreements. If payments related to incentive plans or profit sharing of companies are modified due to the COVID-19 pandemic, the documents related to these plans must be reviewed and adjusted in order to reduce future impacts or potential claims.
The measures above may be or not convenient depending on the specific situation of each company. Therefore, we are available to discuss in more detail the effective benefits and potential risks involved in the filing of administrative or judicial claims related to the above items.
For more information, please contact:
Tel.: (+55) 11 3024 6312
Ana Carolina Utimati
Tel.: (+55) 11 3024 6425
Tel.: (+55) 11 3024 6250
Tel.: (+55) 11 3024 6198
Tel.: (+55) 11 3024 6316
Tel.: (+55) 11 3024 6342
Tel.: (+55) 11 3024 6359
Tel.: (+55) 21 3263 5902