As authorized by ICMS Agreement No. 54/17, the State of São Paulo issued the Decree No. 62,709/17, published July 20, 2017 in the Official Gazette, enacting the Special ICMS Installment Program (“PEP do ICMS”) in order to enable the settlement of ICMS debts relative to taxable events occurring up to December 31, 2016. Such debts will be considered regardless of being assessed or not, enrolled as outstanding debt or not, including those under judicial discussion, provided that the debts, updated in accordance with current legislation, are collected, in cash, with the following discounts:
Number of Installments
Up to 60 Installments
The monthly installments will incur rates of (i) 0.64% per month, in case of payment in up to 12 installments; (ii) 0.80% per month, in cases of payment in 13 to 30 installments; and (iii) 1% per month, in cases of payment in 31 to 60 installments.
It is worth mentioning that, in cases where the payment is made in up to 60 installments, the amount of each installment may not be less than R$ 500.00.
In addition, with regard to debts enforced through a Tax Assessment Notice and Penalty Charge (“AIIM”) not enrolled as outstanding debt, the reductions provided are applied cumulatively to the following discounts on the updated amount of the punitive penalty:
i. 70%, in the case of payment in a lump sum, up to 15 days from the notification of the AIIM;
ii. 60%, in the case of payment in a lump sum, within 16-30 days from the notification of the AIIM; and
iii. 25%, in other cases of ICMS debts enforced through AIIM.
The deadline for accession to the program is from July 20, 2017 to August 15, 2017, by means of access to the website www.pepdoicms.sp.gov.br.
The tax debts arising from transactions or payments of a taxpayer whose registration information with the tax authorities is irregular may only be settled in a lump sum, unless the debt is enrolled and the tax enforcement action is filed.
Also included in the program may be:
i. debts voluntarily reported to the tax authorities, arising from infractions related to taxable events occurring up to December 31, 2016;
ii. debts deriving exclusively from monetary penalties for the non-compliance with ancillary obligations;
iii. balance from installment agreements in connection with the ICMS Installment Incentive Plan (“PPI”), created by State Decree No. 51,960/07;
iv. balance from installment agreements in connection with the Special ICMS Installment Program (“PEP do ICMS”) created by State Decrees No. 58,811/12, No. 60,444/14 and No. 61,625/15;
v. balance from regular installment programs, pursuant to Sections 570 to 583 of the ICMS Regulations of the State of São Paulo (Decree No. 45,490/00) and
vi. certain taxpayers’ debts subject to the rules of the “Simples Nacional” (Federal Simplified Tax System for Small Businesses).
It is important to emphasize that the accession to the program implies (i) irrevocable and irreversible confession of the tax debt, as well as (ii) express waiver of any defense or administrative or judicial appeal, including those already filed.
The accession to the installment program shall be deemed as concluded with the payment of the first installment on the set date. Causes for the breach, in turn, will be as a result of the following circumstances:
i. failure to comply with any of the conditions set out in the Decree found at any time;
ii. failure to pay 4 or more installments, successive or not, except for the first one;
iii. failure to pay at least 3 installments, except for the first one, after 90 days of the due date of the last installment of the agreement;
iv. failure to prove the waiver and collection of any judicial actions costs and charges;
v. incorrect statement, on the date of accession, of the updated amount of deposit in court for purposes of debit balance discounts, or whose deposit does not have any relation with the debts included in the installment program; and
vi. failure to comply with other conditions to be set in a joint resolution of the Treasury Office and the State Attorney Office.
It is worth noting that breaching the installment program will cause the debit balance to be enrolled as outstanding debt – without the granted discounts – with the consequent filing of the tax enforcement action or its immediate enforcement (in cases where the debt was already enrolled and under judicial collection).
Finally, it is important to mention that the accession to the program does not exempt, in the event of debts under judicial discussion, the need to place a full guarantee in the tax foreclosure, as well as the payment of costs, legal expenses and fees, which are reduced to 5% of the amount of the tax debt.
In addition, the judicial deposits made spontaneously as guarantee in the tax foreclosure, referring to the debts included in the program, may be deducted from the debt to be collected, provided that there was no favorable decision to the Public Treasury with final and unappealable decision. In this case, any balance (i) of the debt will be settled under the terms of this program; and (ii) of the judicial deposit in favor of the taxpayer will be refunded.
The requirements for using the ICMS accumulated credits and amounts to be reimbursed will be later regulated by the Treasury Office and the State Attorney Office.
Our tax team remain at your disposal to provide any clarification on the above mentioned matter.
For more information regarding this legal update, please contact TaxpartnersTC@mayerbrown.com.
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.