Brazilian Tax Review – April 2020 24 de April de 2020

Brazilian Government Gives Several Tax Breaks to Mitigate the Covid-19 Crisis 

Due to the health crisis arising from the COVID-19 pandemic, the Federal Government decreed a state of public calamity in Brazil and most governors and mayors ordered “non-essential activities” to be shut down.

In an effort to mitigate the economic effects of these measures, the Federal Government given several tax breaks:

  • Decree 10,285/2020: exempts medical and hospital products from the Federal-VAT (“IPI”) until October of 2020. 
  • Decree 10,302/2020: exempts laboratory and pharmacy articles, gloves and clinical thermometers products from the Federal-VAT (“IPI”) until September of 2020. 
  • CAMEX Normative Ruling 17/2020: exempts goods such as alcohol, disinfectant, medical gloves and surgery masks, among others, from the Import Duty (“II”) until September of 2020. 
  • RFB Normative Ruling 1,927/2020 and CAMEX Normative Ruling 17/2020: simplifies the importation of some goods related to mitigating the health crisis. 
  • Decree 10,305/2020: exempts loans taken out between April 3 and July 3, 2020, from the Tax on Financial Transactions (“IOF-Crédito”). 
  • Provisional Measure 932/2020: reduces third sector contribution taxes (“S System”) by 50% until July 2020.
  • Provisional Measure 927/2020: postpones the FGTS payments related to the months of March, April and May 2020, normally due in April, May and June 2020, respectively, to July 2020.
  • Ministry of Economy Normative Ruling 139/2020: postpones the payment of Social Contributions (“PIS, Cofins, INSS, CPRB and FUNRURAL”) related to March and April 2020, normally due in April and May 2020, respectively, to August and October of 2020.
  • Normative Ruling RFB 1,930/2020: extends the annual tax return submission deadline to June 30, 2020, instead of April 30, 2020, when it would normally be due.
  • Normative Ruling RFB 1,932/2020: extends the deadline to submit the DCTF federal return and the EFD-Contribuições to July 2020, instead of the normal deadline of April, May and June 2020.

All these tax breaks are temporary and are expected to be phased out at the end of the pandemic.

Federal and States Governments Extend the Deadlines to Enforce Overdue Liabilities Certificates

Based on Ministry of Economy Normative Ruling 103/2020, National Treasury Attorney’s Office (“PGFN”) Normative Ruling 7,821/2020 and Regulation 543/2020, the deadlines to enforce federal tax debts included in Overdue Liabilities Certificates are extended for 90 days, from March 18, 2020, onwards.

In addition, from March 21, 2020, São Paulo State authorities cannot protest Overdue Liabilities Certificates for 90 days. Rio de Janeiro State authorities are prevented from protesting these instruments for 60 days, starting on March 24, 2020.

Once the suspension periods have run, the federal and state authorities will be allowed to enforce the Overdue Liabilities Certificates normally if the deadlines are not amended due to the continuation of the crisis.

Lawful Taxpayer Program’s Adhesion Deadline is Postponed 

The Brazilian Government has launched the “Lawful Taxpayer” Program with Provisional Measure 899/2019, providing regulations for taxpayers and tax authorities to negotiate terms for the settlement of outstanding federal tax debts.

The application deadline for this program was originally March 25, 2020, but has now been extended to June 30, 2020. 

Debt Clearance Certificates’ Expiration Dates are Extended

The National Treasury Attorney General’s Office and the IRS have extended the validity of debt clearance certificates related to Federal Taxes for an additional 90 days. This measure applies to debt clearance certificates that were valid on March 24, 2020.

E-Digital Project Moves Forward 

The Federal Government issued Decree 10,278/2020, which regulates the so-called Brazilian Digital Transformation Strategy (E-Digital), launched by the “Economic Freedom Act,” which establishes the right to use, transmit and file any microfilmed or digitalized document with the same standing and legal validity as the physical document.

The decree standardizes the technical and legal requirements for digitizing analog material and submitting private and public documents signed and certified under Brazilian public-key infrastructure standards.