On 04/30/2019, the Official Gazette carried the publication of Provisional Measure No. 881/2019 ("PM"), which institutes the Declaration of Economic Freedom Rights, establishing free market guarantees, and the analysis of the regulatory impact, among other measures.
From a tax perspective, the key changes brought about by the Provisional Measure in Law No. 10,522/2002 can be summarized as follows:
- There is no longer a limit enshrined in the law for the Office of Attorney-General of the National Treasury ("PGFN") to shelve tax execution proceedings on overdue Tax Liabilities. Previously, the limit was ten thousand reais (R$ 10,000.00). When the PM comes into force and effect, the amount will be established by an act of the PGFN;
- Precedents of the federal tax administration, to be issued by a committee consisting of members of the Superior Court of Administrative Tax Appeals ("CARF"), the Brazilian IRS, the Ministry of Economy and the PGFN, will bind all normative and decision-making acts issued by those offices;
- The situations in which PGFN is waived from challenging, filing appeals and counter-arguments have been expanded. From now on, these situations are no longer tied exclusively to the consolidated case law of the Superior Court of Justice ("STJ") and the Federal Supreme Court ("STF") on the matter. This waiver may occur in relation to: (i) matters on which the PGFN or the Federal Attorney General's Office ("AGU") have already issued an Opinion (ii) matters considered as binding by the federal tax administration; (iii) matters based on legal provisions declared unconstitutional by STF, on the diffuse control level; (v) matters declared constitutional by the STF, or resolved by the STJ, the Superior Labor Court ("TST"), the Superior Electoral Court ("TSE") or the National Panel of Case Law Standardization, within the scope of their jurisdictions, when there is no possibility of a reversal of the decision, in accordance with the criteria defined in an Act of PGFN;
- Situations of waiver may be extended to proceedings involving a different theme from the one being judged, when they are subject to the decisive grounds of the main judgment or the consolidated case law;
- Tax Auditors shall not constitute tax assessments on whose subject matter an appeal has been waived, with due regard for the provisions of the Opinion of the PGFN, or the Opinion or Precedent of the AGU. In addition, they shall abide by such matters when ruling on the official review of assessments or requests for refund of overpaid taxes.
- The PGFN may refrain from going to court, including the withdrawal of appeals, when the pecuniary benefit intended by doing so does not meet the criteria of rationality, economy and efficiency.
Section 1, paragraph 2 expressly states that with the exception of the right of any natural person or legal entity to file any document using microfilm or digital means, the provisions of Sections 1 to 4 of the PM do not apply to Tax Law.
Furthermore, Section 3, paragraph 4, item I holds that the freedom granted to define sales prices cannot be used for the purpose of reducing the value of the tax owed, postponing the levying thereof or remitting profits abroad in the form of costs.
The tacit approval of government permits, after the maximum term for analysis has elapsed, as provided in Section 3, paragraph 7, item I does not apply to tax matters of any kind.
Lastly, the new text has introduced relevant modifications to the piercing of the corporate veil, establishing that the proceeding can only affect the assets of partners or administrators who have directly or indirectly benefited from the improper use, as well as defining what is meant by deviation of purpose and co-mingling of assets.
Among the modifications that may have a significant tax impact is the definition that the mere expansion of or alteration to the original purpose of the specific economic activity of the corporate entity does not constitute a deviation of purpose. Likewise, the existence of an economic group is not grounds for piercing the corporate veil.