What is the relevant legislation relating to tax administration and controversies? Other than legislation, are there other binding rules for taxpayers and the tax authority?

The Brazilian tax system is grounded on a civil law basis. There are tax provisions under the Federal Constitution, the national tax code, plus supplementary and ordinary laws. As a Federative Republic, not only the federal administration, but also states and municipalities, have their own tax system, with local taxes and local rules.

For regulating such general provisions, each federative entity may issue its own decrees, ordinances, normative rulings, normative opinions and private-letter rulings.

Tax treaties are also considered as part of the normative tax system in Brazil, and when they are internally approved they acquire the legal status of supplementary law. Nonetheless, treaties are not self-enforceable in Brazil. They have to be approved by the Brazilian Congress after being executed abroad.

In parallel to this set of rules, courts may also issue certain standards on tax matters. Except for a few types of decisions, case law is not issued with binding effect, but provides general guidance on matters that are not expressly addressed by tax rules.

Specifically, when it comes to tax disputes, there are certain rules providing on both administrative tax proceedings and judicial litigation. On the federal level of review, the most relevant rules are the following: Law No. 9,784/99; Decree No. 70,235/72; Decree No. 7,574/11 and the Civil Litigation Code.

Relevant authority

What is the relevant tax authority and how is it organised?

Collection and payment of federal taxes in Brazil are managed by the Receita Federal (the Brazilian IRS), an administrative structure within the Ministry of Economy. This structure also comprises the administrative level of review, when any infraction notices are assessed. The Brazilian IRS has internal divisions for addressing specific topics, such as collection and assistance, taxing and litigation, auditing and inspection, customs and international relations.

States and municipalities also have similar structures for collecting taxes.

Once the tax is considered definitively due and payable, namely, if no claims are presented against the charge, or if the taxpayer challenges it, but at the end of the administrative level of review the debt is maintained, the National Treasury Office is the competent authority for enrolling the tax debt in the Federal Debt Roster and filing the appropriate enforcement action.


Compliance with tax laws

How does the tax authority verify compliance with the tax laws and ensure timely payment of taxes? What is the typical procedure for the tax authority to review a tax return and how long does the review last?

As a general rule, for most of the taxes in Brazil the taxpayer submits a tax return and collects the amount considered due. Tax authorities have a five-year term for claiming any possible outstanding amounts. This is the statute of limitations for tax authorities analysing taxpayers’ returns and assessing possible debts or penalties.

This term may be counted either as from the triggering event (when the taxpayer paid any amounts of taxes to the tax administration and there is no simulation, fraud or abuse), or as from the first day of the calendar year subsequent to that when the tax was due (when no taxes have been collected, or when tax authorities claim that the taxpayer acted fraudulently).

In principle, the audit proceedings may involve any past facts that might have affected the collection and payment of taxes over the previous five-year term, there being no particular rules in that respect.

Types of taxpayer

Are different types of taxpayers subject to different reporting requirements? Can they be subjected to different types of review?

Yes. Individual and corporate taxes are quite different, each of them subject to specific rules. Although all taxes are managed, audited and assessed by the same authority, taxes paid by individuals and by legal entities differ from each other and are analysed by different divisions of the Brazilian IRS.

Requesting information

What types of information may the tax authority request from taxpayers? Can the tax authority interview the taxpayer or the taxpayer’s employees? If so, are there any restrictions?

Tax authorities may request any information that may affect the ascertainment and collection of taxes. In most cases, the request for information is put in writing and the taxpayer has to send this information, also in writing, to the tax authorities. Interviews and requests for meetings with tax authorities are not common, although in certain very particular and specific cases - especially involving large taxpayers - this procedure has been adopted by the Brazilian IRS.

Available agency action

What actions may the agencies take if the taxpayer does not provide the required information?

If the taxpayer fails to attend to requests for documents and information, tax authorities may impose additional penalties over the assessment and a presumed tax basis for the charges.

Protecting commercial information

How may taxpayers protect commercial information, including business secrets or professional advice, from disclosure? Is the tax authority subject to any restrictions concerning what it can do with the information disclosed?

Brazilian legislation expressly provides for tax confidentiality regarding any information disclosed to tax authorities.

Limitation period for reviews

What limitation period applies to the review of tax returns?

As a general rule, Brazilian tax legislation provides for a five-year statute of limitations. The controversial aspect is when such term starts, that is, whether from the triggering event, or from the subsequent calendar year.

Alternative dispute resolution

Describe any alternative dispute resolution (ADR) or settlement options available?

Brazilian legislation does not provide for alternative dispute resolution methods. Nonetheless, the National Treasury Office recently issued specific guidelines for taxpayers on negotiating certain aspects of tax disputes (eg, guarantees, deadlines for submitting motions, requests and opinions).

Collecting overdue payments

How may the tax authority collect overdue tax payments following a tax review?

If the tax is considered due and payable, it is deemed to be ‘enforceable’, which means that it would be subsequently forwarded for registration with the Federal Debt Roster - in which situation a 20 per cent additional legal charges fee is included in the updated amount of the debt - and then its new updated amount is sent to be executed against the company in a Tax Enforcement Proceeding to be moved by the National Treasury Office. In a Tax Enforcement Proceeding, the National Treasury Office will try to forcibly seize whatever assets it finds in the company, including bank accounts and other available assets.

Once the Tax Enforcement Proceeding is filed, the taxpayer will have a specified period to offer a guarantee. After the guarantee is offered, a Motion to Stay Enforcement may be filed to challenge the merits of the enforcement once again. This should open a discussion on the merits of the case.


In what circumstances may the tax authority impose penalties?

Whenever taxpayers fail to collect and pay taxes in a timely manner or to submit their tax returns on time, penalties may be imposed. Penalties for non-compliance with ancillary duties may be charged even if there was not any miscollection of taxes.

How are penalties calculated?

There are two types of penalties that can be applied by the tax authorities if they eventually issue an Infraction Notice against the taxpayer: (i) a 75 per cent default penalty; or (ii) a 150 per cent aggravated penalty. The 75 per cent penalty is applied in most of the cases where the tax authorities understand that the taxpayer did not act in wilful misconduct, fraud or simulation. Conversely, the 150 per cent aggravated penalty will be imposed if the tax authorities understand that the taxpayer did practice acts that are to be treated as wilful misconduct, fraud or simulation.

Under Brazilian tax law, an aggravated penalty of 150 per cent can only be imposed in cases where an evident intent of fraud is proved, that is, when the tax authorities are able to establish unequivocally the taxpayer’s purpose of deluding, hiding from or deceiving them.

There are also other types of penalties, such as an isolated penalty of 50 per cent if the taxpayer fails to anticipate taxes in a certain collection regime or if it has an offset request denied by tax authorities. Furthermore, under Brazilian tax law, if the taxpayer acknowledges any debts prior to any action being taken by the tax authorities and settles these before any Notice is issued, then it will be subject to a penalty equivalent to 20 per cent on the claimed taxes, added to SELIC interest (base interest rate set by the Brazilian Central Bank to control inflation). Depending on the circumstances, there will be arguments to defend that even the 20 per cent would not have to be paid, as this would be a voluntary disclosure procedure.

In the case of non-compliance with ancillary duties, there are a series of penalties that the taxpayer may be subject to. Those penalties may involve either a small fixed amount or a percentage of the taxpayer’s gross revenues or of the challenged transaction.

What defences are available if penalties are imposed?

If an Infraction Notice is issued, the following options are available: (i) settling the Notice within 30 days, with a 50 per cent discount on whatever penalty was applied; or (ii) filing an objection to the Infraction Notice, outlining the reasons why the Notice should be cancelled and then officially initiating the litigation in the tax administrative sphere.

If the notice is settled within 30 days with a 50 per cent discount on the penalty applied, no litigation in the administrative sphere will be permitted. Nonetheless, the taxpayer will still have the option of filing a lawsuit in a court of law seeking to receive back the amounts paid in settlement of the Infraction Notice.

Collecting interest

In what circumstances may the tax authority collect interest and how is it calculated?

Any possible charges accrue interest, which is calculated, at the federal level, according to the SELIC rate (currently set at 6 per cent per year).

Criminal consequences

Are there criminal consequences that can arise as a result of a tax review? Are these different for different types of taxpayers?

In Brazil, a tax proceeding may lead to the filing of a criminal proceeding to analyse the same facts that, in addition to characterising an administrative misconduct, could also incur an allegation of tax evasion. In this respect, the tax authorities of the Brazilian IRS are required to communicate to the Federal Public Prosecutor’s Office any administrative violation that, in theory, could also represent a crime. Such communication is made through the delivery of a Tax Representation for Criminal Purposes.

However, such criminal claim can only be delivered after a final decision is rendered with regard to the creation of a tax credit within the administrative sphere.

When receiving this communication, the Federal Public Prosecutor’s Office may: (i) present charges against the parties responsible for the tax evasion, if it understands it has all the elements required for such; or (ii) request the filing of a police investigation so that the Federal Police Authority may examine the materiality of the supposed crimes and identify the perpetrator of the facts informed.

In Brazilian criminal law, by rule, the only active subjects of crime are individuals who, in any way, have contributed to the practice of a crime, through action (positive conduct) or omission (negative conduct, in cases where the subject had the power and duty to prevent a result considered wrongful).

The criminal liability is subjective and personal, and the participation of the individual in the practice of the crime - whether by fraudulent intent (the general rule, as in the case of a crime against the tax system) or by fault (only in cases in which the law sets forth the option of negligence with regard to the wrongdoing) - must be proven.

However, the public authorities often, and improperly, tend to consider as suspects of committing the crime the representatives of the legal entity at the time of the facts under investigation, without analysing such requirements.

In this respect it is also worth mentioning that the effective settlement of the claimed taxes by the taxpayer, added to the respective late-payment fine and interest, prior to a formal criminal accusation being made by the prosecutor, would be able to eliminate any possible criminal implications connected with the case.

Business entities are not subject to criminal liability. It applies to individuals (subject and personal liability), depending on the participation of the individual in the practice of the crime.

Enforcement record

What is the recent enforcement record of the authorities?

Pursuant to public information made available in databases maintained by the Brazilian IRS, a figure of approximately 1.84 trillion reais in infraction notices is being discussed, being 1,125.29 billion reais still under discussion in the administrative level of review and 339.39 billion reais still under discussion in the judicial level of review.

Third parties and other authorities

Cooperation with other authorities

Can a tax authority involve or investigate third parties as part of the authority’s review of a taxpayer’s returns?

Yes, this is legally possible. The Brazilian tax code determines that certain entities and institutions must cooperate with tax-audit proceedings (eg, government employees, financial institutions, asset managers, brokers, auctioneers and official forwarding agents).

Does the tax authority cooperate with other authorities within the country? Does the tax authority cooperate with the tax authorities in other countries?

Within the country, the tax authorities of different spheres (ie, federal, state and municipal) may cooperate in mutual exchange of information and assistance, based on article 199 of the Brazilian National Code (CTN) and specific internal regulations.

It is legally possible to cooperate with the tax authorities in other countries. Brazil has entered into double taxation conventions and treaties for exchange of tax information (including the Foreign Account Tax Compliance Act (FATCA) and the OECD’s Common Reporting Standard (CRS)).

Special procedures

Voluntary disclosure and amnesties

Do any special procedures apply in cases of financial or other hardship, for example when a taxpayer is bankrupt?

There are certain special regimes for companies in bankruptcy situations, such as instalment programmes. One of them is set forth under Law 13,043/14.

Are there any voluntary disclosure or amnesty programmes?

Yes. In recent years, Brazilian authorities (federal, state and municipal) have issued a series of instalment and amnesty programmes. In parallel to that, federal legislation also provides for the possibility of tax debts being paid in 60 monthly instalments.

Rights of taxpayers

Rules protecting taxpayers

What rules are in place to protect taxpayers?

Brazilian law provides for a series of principles, prerogatives and rights for taxpayers when dealing with tax matters. Most of them derive from the Federal Constitution, but there are also rules referring to taxpayers’ rights.

Requesting information

How can taxpayers obtain information from the tax authority? What information can taxpayers request?

As long as the information does not lead to a breach of tax confidentiality, there are certain mechanisms by which tax authorities may disclose tax information. Also, in recent years, many rules, private-letter rulings, ordinances, normative opinions, etc have been published by the Brazilian IRS.

Federal Law 12,527/11 also provides for a mechanism for citizens to obtain information from federal, state and municipal authorities.

Tax authority governance

Is the tax authority subject to non-judicial oversight?

Yes. Tax authorities are subject to internal oversight within the administrative government body, as they must act in compliance with applicable rules.

Court actions (describe trial court actions in this section)

Competent courts

Which courts have jurisdiction to hear tax disputes?

Tax claims may be filed either at the administrative level of review or at the judicial level of review.

Lodging a claim

How can tax disputes be brought before the courts?

Tax claims may be started either by the taxpayer or by the tax authorities (this latter case usually involving an assessment), and there are two main levels where taxpayers may discuss tax matters: (i) the administrative level of review; and (ii) the judicial level of review. Both have a similar structure, grounded in three different levels of review.

In the administrative level, after the claim has been submitted, there is a first level-decision issued locally by the Federal Revenue Chief Officer (if the dispute derives from an assessment, the taxpayer may present an objection, where it will appoint its arguments and evidences). Once the first-level decision is issued, an appeal (called Voluntary Appeal) may be filed by the party, requesting its case to be reviewed by the Tax Administrative Appeals Council (CARF), at the second level within the administrative sphere.

Each Judgment Chamber in the Tax Administrative Appeals Council is made up of six members, three being appointed by the tax authorities and three by the taxpayers’ associations. If a case is tied, it will be deemed to have been ruled in favour of the government.

There is a third level in the administrative sphere, which is the Tax Appeals Superior Chamber (CSRF), but it will only review a case if the party (either the taxpayer or the government, as the case may be) is able to show that a conflicting decision was handed down on the same subject by the Tax Administrative Appeals Council, either by the same Chamber or by a different one.

As a result, if the Tax Administrative Appeals Council rules the case against the taxpayer, and the taxpayer is able to find a divergent decision on the same subject, it will be allowed to file a further appeal (called a Special Appeal) to the Tax Appeals Superior Chamber. The contrary is also true - tax authorities can also file a Special Appeal to the Tax Appeals Superior Chamber if the case is ruled in favour of the taxpayer by the Tax Administrative Appeals Council.

Each chamber of the Tax Appeals Superior Chamber is made up of eight members, four being appointed by the tax authorities and four by the taxpayers. As in the Tax Administrative Appeals Council, a tie result in the Tax Appeals Superior Chamber is deemed to be in favour of the government.

It is important to point out that the taxpayer cannot litigate the same case at the same time in both the administrative and judicial spheres. In practice, the judicial sphere will always be an open option for the taxpayer, whereas the administrative sphere will only review a case of the taxpayer that has not initiated any judicial discussion in the same regard.

It is also worth mentioning that if a final decision is issued in favour of the taxpayer in the administrative sphere, the case will be over, because, except in some very special circumstances, the tax authorities will not be allowed to take the case to the judiciary to be reviewed. In contrast, if a final decision is handed down against the taxpayer in the administrative sphere, the taxpayer will still have the option of going to the judiciary and filing a lawsuit claiming for its case to be further reviewed, either on the same arguments or different ones.

In turn, the judicial level of review is also made up of three levels: (i) first-degree court of law; (ii) Appeals Court; and (iii) the Superior Court of Justice (STJ) and the Federal Supreme Court (STF). In the first-degree court of law, a single judge will examine and rule on the case. In the event of an unfavourable decision, the party (taxpayer or the tax authorities) will be allowed to file an appeal to the Appeals Court, which is made up of three judges. In the case of another unfavourable decision, the party may file another appeal to the STJ and the STF.

While the STJ will review every case where the appealed decision had allegedly violated a law, the STF will only do so if it deems the case to be of general interest to the country and society.

Combination of claims

Can tax claims affecting multiple tax returns or taxpayers be brought together?

Although not mandatory, this may be possible depending on the specific situation. However, when the superior courts apply binding effects to a case that should be analysed, all other proceedings regarding that matter should be suspended, until the decision is finally issued.

Pre-claim payments

Must the taxpayer pay the amounts in dispute into court before bringing a claim?

It is possible that the taxpayer settles the debt and pursues a refund at the judicial level of review. Nonetheless, such a procedure is rather unusual in Brazil.

Cost recovery

To what extent can the costs of a dispute be recovered?

At the administrative level of review, each party bears its own costs. At the judicial level of review, in turn, the defeated party may be required to reimburse dispute costs, depending on the type of action.

Third-party funding

Are there any restrictions on or rules relating to third-party funding or insurance for the costs of a tax dispute, including bringing a tax claim to court?

There are no restrictions. As a matter of fact, when it comes to judicial proceedings, the taxpayer may be required to post bonds and guarantees for discussing the merits without the risk of tax authorities attempting to enforce the collection of the tax debt (see question 39).

Court decision maker

Who is the decision maker in the court? Is a jury trial available to hear tax disputes?

The general aspects of the administrative and judicial litigation are discussed in question 25. Brazilian law does not provide for jury trials for tax matters.

Time frames

What are the usual time frames for tax trials?

There is no defined time frame for tax trials. On average, an administrative tax review takes from five to seven years, while a judicial dispute may take from eight to 12 years including the final avenues of review (Superior Court of Justice/Federal Supreme Court).

Disclosure requirements

What are the requirements concerning disclosure or a duty to present information for trial?

Taxpayers may produce evidence in both administrative and judicial proceedings, although it is more common in the latter type of litigation. At the first level of judicial review, there is a specific moment in the hearing (before the decision is issued) when the parties may appoint evidence to be produced, indicate assistants, etc.

Permitted evidence

What evidence is permitted in a tax trial?

Any evidence is allowed to be presented. Nonetheless, for the issues generally involved in tax matters, it is not common to have testimonies. Expert opinions are relatively common for confirming technical aspects (accounting, regulatory or factual circumstances).

Permitted representation

Who can represent taxpayers in a tax trial? Who represents the tax authority?

At the administrative level of review, there is no formal obligation to have an attorney for filing defences, appeals and presenting the arguments before CARF/CSRF, although it is rather common and even recommended, due to the technicalities usually involved in tax cases.

On the other hand, for judicial claims it is mandatory to have a lawyer duly enrolled with the Brazilian Bar. If the taxpayer is not able to afford legal representation, it may request free judicial assistance (although not common in tax disputes): Brazilian legislation (Federal Law No. 1,060 of 1950) and Special Court’s Ruling No. 481 (STJ) allow the taxpayer to be represented by a public attorney, provided that the absence of financial conditions is proved.

Tax authorities are represented by public attorneys.

Publicity of proceedings

Are tax trial proceedings public?

At the administrative level of review, only the judgment sessions and decisions issued by CARF/CSRF are public. All other case matters are strictly confidential, to which only the involved party and its representative may have access. On the other hand, judicial proceedings are public, except if the parties request judicial confidentiality to be imposed by the judge.

Burden of proof

Who has the burden of proof in a tax trial?

As a general rule, in the Brazilian legal system, the burden of proof lies with whoever asserts the claim, and it is important to mention that tax legislation usually grants to tax authorities an assumption of validity on their allegations, so that the taxpayer is also required to counterargue such claims when made.

Case management process

Describe the case management process for a tax trial.

See question 25.


Can a court decision be appealed? If so, on what basis?

See question 25.


Recent developments

What are the current trends in enforcement of tax controversies? What are the current concerns of the authorities and taxpayers in relation to the enforcement and handling of tax controversies and are these likely to change? Are there proposals to change the relevant legislation or other rules?

Key developments of the past year39 What are the current trends in enforcement? What are the current concerns of the authorities and taxpayers? Are there proposals to change the relevant legislation or other rules?

At the federal level of review, the most relevant subjects currently under discussion involve transfer pricing disputes and assessments disallowing the tax deduction of goodwill amortisation expenses, which involve the most significant amounts assessed by the Brazilian IRS.

Tax authorities and administrative tax courts have been adopting a very strict approach in regard to these complex tax matters, and in recent years many assessments have been maintained as originally issued, regardless of the provisions specifically set forth under applicable rules - the reason why, in our view, such cases will necessarily lead to judicial tax disputes.

These cases also reflect one practical trend that may be subject to future discussions: the requirement of posting guarantees. One very important difference between the judicial and the administrative spheres is that, in the administrative level, the taxpayer is allowed to litigate the case without having to present guarantees or deposit the disputed amounts. In contrast, if an unfavourable decision is handed down at any stage in the judicial sphere, the taxpayer will be required to: (i) make a deposit in court; or (ii) present guarantees covering the whole amount of the disputed tax debt; otherwise, the tax authorities are able to initiate the execution of the disputed amounts, regardless of whether the litigation in the judicial sphere is over yet.

Other than that, in recent years there have been some proposals on whether the administrative tax courts should be restructured or even abolished, but in our opinion they play a very important role in settling tax disputes and, in many cases, avoiding long discussions to be taken to judicial courts. We do not believe that radical changes should take place in regard to tax disputes.