Originally published in the April 24 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil has published in its official gazette of April 20 Agreement (Convênio)1 No. 51/2007, which authorizes some Brazilian states to grant tax amnesties and special tax payment schedules related to the state value added tax (ICMS).
The convênio applies to the states of Acre, Alagoas, Amapá, Paraíba, Paraná, Rondônia, Roraima and São Paulo. For São Paulo, Brazil’s most developed state, this is the second tax payment schedule published within the last 12 months.
The new tax payment schedule, which depends on local (state) legislation to enter into force, applies to unpaid ICMS tax debts for taxable events that occurred by December 31, 2006. Convênio 51 provides for different types of payment schedules, as follows:
- Lump sum payment with a discount of up to 75 percent for delay or assessed penalties and up to 60 percent for interest.
- Up to 120 monthly installments with a discount of up to 50 percent for delay or assessed penalties and up to 40 percent for interest. Under this payment schedule, interest will be calculated as follows: for liquidation of the tax debts within 12 monthly installments, interest will be 1 percent per month on the consolidated tax debt; for liquidation in more installments, interest will be calculated according to the SELIC rate (12.5 percent per annum).
- Up to 180 monthly installments, with each installment representing at least 1 percent of the taxpayer’s monthly gross income, with a discount of 50 percent for delay and assessed penalties and 40 percent for interest. This installment payment is subject also to the following conditions: The amount of the first installment cannot be lower than 1 percent of the taxpayer’s average monthly gross income during 2006; no monthly installment can be lower than the first installment added by interest calculated according to the SELIC rate; a bank guarantee, real estate property, or other assets allowed by state law will be required to secure the payment schedule under this option.
Application to the tax payment schedules must be filed by September 30, 2007, as specified by state laws.
For tax debts for which there are pending administrative tax appeals or court orders suspending payment, the taxpayer is required to formally and irrevocably waive appeal or legal action before including the debts in the new payment schedule.
The payment schedule will be terminated if:
- the taxpayer does not comply with any of the convênio requirements;
- the taxpayer is in default of any monthly installment for more than 90 days;
- the guarantee is terminated;
- the taxpayer fails to pay any ICMS due after it has filed for the payment schedule; or
- the taxpayer fails to comply with any other requirement established by state laws.
FOOTNOTE
1 Convênios are agreements among all 27 Brazilian states that must be approved unanimously. They authorize individual states to introduce tax reductions and exemptions, tax amnesties, and other state tax incentives and relief. Convênios are needed to prevent unfair, harmful tax competition among the states and to legitimize the incentives. States that grant tax incentives without a convênio may have those incentives challenged by other states before the Supreme Court.
END OF FOOTNOTE
David Roberto R. Soares da Silva