Currently, most taxes are subject to entry upon approval regime, which is based on the declaration of the liabilities, and the taxpayer is also attributed with compliance with several ancillary obligations, such as the delivery of DCTF which is an acknowledgment of indebtedness, as well as the Offsetting Declaration.
Pursuant to article 147, paragraph 1, of the Brazilian Tax Code, the possibility to rectify the declaration by the taxpayer itself aiming at the reduction or exclusion of the tax is only allowed upon evidence of mistake and before the entry is notified.
However, although the taxpayer is not allowed to rectify its declaration after the entry is notified, this does not prevent such taxpayer to demand the cancellation thereof, otherwise tax authorities would be benefiting from a mistake made by the taxpayer.
In this regard, the Judiciary Branch has been acknowledging the possibility of the taxpayer to evidence, for example, through Motions to Stay Execution, that the declaration was delivered with a mistake and that the debts were mistakenly declared: one, due to the fact they do not exist; two, due to the fact that the triggering event of such tax has not occurred, or also, three, due to a mistake in the quantifying thereof. In addition, Brazilian Constitution, in article 5, XXXV, sets forth that the law shall not exempt the Judiciary Branch from the verification of harm to rights.
In addition, the pursue of material accuracy must always be privileged in connection the taxpayer’s condition, provided that a potential filling mistake of the Declaration or Offsetting Request cannot, by itself, restrict the taxpayer’s right, attributing to such taxpayer an inexistent debt.
Upon duly evidence of filling mistake of the declaration, the entry made by the tax authority and the active debt shall not prevail, under penalty of unjust enrichment of Tax Authorities.
However, at least at a first sight, the acknowledgment of inexistence of debt at Motions to Stay would not exempt the taxpayer from liens related to payment of fees, provided that a mistake by the taxpayer caused the registration of active debt and the respective filing of tax foreclosure.