Provisional Measure No. 685/2015, which, among other measures, established the Program for Reduction of Tax Litigation (“PRORELIT”), was published on July 22, 2015.
PRORELIT allows the payment of tax debts that fell due by June 30, 2015, and were being discussed in administrative and judicial proceedings, including those with deposits in court, by setting the debts off against credits derived from accumulated tax losses accrued until December 31st, 2013, and reported to Brazilian Tax Revenue Office by June 30th, 2015.
After fully using their own credits derived from accumulated tax losses, applicants can use the tax losses carried forward by (i) directly or indirectly controlling and controlled entities; (ii) entities directly or indirectly controlled by the same company; and (iii) entities that were the obligors or co-obligors of the relevant tax credit discussed in administrative or legal proceedings.
In order to benefit from PRORELIT, a legal entity is required to make a cash payment of at least 43% (forty three percent) of the consolidated debt, whereas the outstanding balance can be paid with the use of credits derived from accumulated taxes losses.
Both the application to participate in the PRORELIT and the payment have to be made by September 30, 2015.
Finally, we highlight that the PRORELIT program does not include debts already subject to installment payment programs, even where a legal entity’s participation in the program has already been terminated.
Observations in this update about Brazilian law are by Tauil & Chequer Advogados. They are not intended to provide legal advice to any entity; any entity considering the possibility of a transaction must seek advice tailored to its particular circumstances.