On May 24, 2019, Decree No. 58,767 (the "Decree") was issued by the Municipality of São Paulo, regulating the procedure for offsetting credits related to certificates of government judgment debt against both municipal tax and non-tax arrears, the former including Tax on Services (ISS) and the Property Tax (IPTU).
The purpose of the Decree was to regulate Section 105 of the Act of Temporary Constitutional Provisions (ADCT). The option for this regime will only be available between June 1 and July 30, 2019.
We detail below the main aspects of the Decree:
- The ownership of the certificates of government judgment debt may lie with the taxpayer or third parties, the latter in cases of inheritance or assignment of the credit;
- The arrears that may be offset are those recorded as delinquent debt by March 25, 2015, enrolled for collection by judicial tax foreclosure;
- The certificates of government judgment debt can only be offset up to 92% of the total arrears, while the remaining 8% must be paid in cash as a condition for authorizing the offset;
- It is possible to use more than one certificate of government judgment debt to offset a single arrearage, while it is also possible to use one certificate of government judgment debt to offset multiple arrears;
- In case the value of certificates of government judgment debt exceeds the arrears, the remaining balance will be carried forward. On the other hand, where the certificates of government judgment debt are not sufficient to offset the arrears, the difference shall be paid in up to five installments;
- The offset is conditional on the waiver of any right discussed in any present or future judicial or administrative lawsuit in which the arrears are challenged;
- This waiver also implies express authorization for the Municipality to release court or extrajudicial deposits of the arrears challenged. This authorization must be submitted within five calendar days from the offset request; and
- The administrative ruling on the offset can be subject to appeal within 15 calendar days.