Brazil launches selective debt relief program for company and citizen

Because of its experience with economic crises, Brazil has introduced debt relief programs in the past. A pre-Covid-19 installed relief programs is called “Refis in Crisis” (Refis = Recuperacao Fiscal, financial recuperation ). Now, in response to the new coronavirus pandemic, President Bosonaro`s economic team decided to anticipate pressure from the National Congress and will launch its own program to renegotiate tax debts for taxpayers who are experiencing financial difficulties. In contrast to the “refis in crisis”, this one will be a “selective refis”: only those who prove that they cannot pay the debt with the Union will be able to enter the debt relief program. It will be possible to renegotiate both debts prior to the crisis and any debts accumulated in the most critical period of the pandemic.

 

How does the “Selective Refis” differ from previous programs?

The model is different from the past editions of Refis, in that any taxpayer could join and obtain discounts on interest and fines, without distinguishing between good paying and distressed companies that seek to evade tax collection. The Centrão block of parties, which now gives political support to President Jair Bolsonaro in the National Congress, had been supporting a bill that in practice created a Super Refis, with discounts of up to 90% on fines and even a safe-conduct for companies and individuals to stop paying debts incurred until December, when the state of public calamity decreed by the government as a result of the pandemic ends. The economic team had been following the opening of a new Refis without restrictions with concern and took the lead. The Ordinance of the Attorney General of the National Treasury (PGFN) creating the “exceptional transaction” was be published on Wednesday, June 17th. In practice, this does not prevent Congress from approving a bill creating a Refis, but it puts the government one step ahead of those joints.

According to Estadão / Broadcast, initial estimates from the economic area point to a debt negotiation between R $ 50 billion and R $ 60 billion, but the figures were still being revised on Tuesday night, July 16th.

Which Deadlines apply?

According to the program rules, the discounts and the terms that will be offered in the negotiation will vary according to the contributory capacity of the company or individual that pleads for the negotiation. There will be an assessment of the taxpayer’s economic situation to see if he would be able to settle the liability without discount or not.

For example, if a company saw its revenue drop 50%, the government will analyze the new reality of revenues, obligations (with employees, for example) and calculate what is the value of the portion that fits in that company’s budget. If the taxpayer is able to pay a normal installment, without rebates, he will not be entitled to the discount. He will only access the most advantageous condition if it is in fact necessary for him to be able to honor the obligation.

“It is not for everyone. There is a company that increased revenues or whose drop in revenues did not affect the ability to pay debts, ”said a source from Estadão / Broadcast.

 

How are Debts treated?

The installment terms will also be calculated according to these variables, since a larger number of installments can reduce the discount granted, since the margin for the taxpayer to pay per month would increase. Pension debts continue to be limited to 60 months in installments.

 

These regulatory changes could affect your business with view to customizing or support of your ERP/SAP system. Please contact us to learn about possible necessary reactions to the changes – we are happy to assist you!