Consequently, tax controversy plays an important role for
almost all companies located in Brazil, which usually suffer
assessments by the Federal Revenue Service and have to discuss
it through long years and in many different instances at the
administrative and judicial levels. In April 2018, President of
the Tax Administrative Court (CARF) Adriana Gomes Rego said the
BRL600 billion ($161 billion) is under discussion before the
CARF. Considering that the CARF only appreciates federal taxes
under discussion in the administrative level, it is easy to
deduce that, overall, tax litigation in Brazil has even more
significant amounts involved.
In face of that instability, it worth mentioning that the
Federal Constitution (Article 5, XXXVI) establishes legal
safety, determining the protection of acquired rights, "perfect
legal acts" and situations already judged (decisions rendered
final). Specifically in the tax sphere, legal safety is also
guaranteed by the article 146 of the National Tax Code, which
states that new criteria the tax authorities use for
assessments can only be reached following tax events, never
returning to affect previous acts.
Despite those norms, however, it is clear that tax legal
safety has not been really protected in Brazil. Tax authorities
commonly change their opinions, imposing different tax
assessments, with qualified penalties, and can hold legal
representatives and shareholders responsible for tax
Fortunately, in April 2017 Law No. 13.655/2018 was
published, bringing relevant changes in Brazilian legislation,
especially for tax legal safety and in the efficient creation
and application of public law.
Decree-Law No. 4.657/1942 (named the introduction law
for the Brazilian legal norms) is extensively applicable across
Brazilian legislation once it establishes some rules that serve
as basis for the interpretation and application of other norms,
such as vacation legis, the effects of legislative
modifications to prior facts, the enforcement of the law, etc.
In that sense, Law No. 13.655/2018 added some articles to
Decree-Law No. 4.657/1942 in order to impose some imperative
commands that public authorities must pursue.
According to Article 1° of the Law No. 13.655/2018
(included Article 24 to Decree-Law No. 4.657/1942),
decisions in the administrative and judicial spheres regarding
the legality of acts, contracts, proceedings or administrative
norms have to take into consideration the "general
orientations" of the time in which they were produced, avoiding
ulterior new orientations reflecting on previous acts.
The only subsection of that article states that "general
orientation" should be understood as the interpretation
contained in general public acts, majority administrative and
judicial precedents, as well as those widely known repeated
practices of the authorities.
Moreover, Article 1° of Law No. 13.655/2018, which
includes Article 30 to Decree-Law No. 4.657/1942,
establishes that public authorities must pursue the increase of
the legal safety in the application of the norms, as launching
summaries of discussions and overviews of its opinions.
It is clear, therefore, that Law No. 13.655/2018
represents a huge advance for all Brazilian legislation when
safeguarding taxpayers is concerned, given that the
"introduction law for the Brazilian legal norms" has unlimited
scope and is also applied as a basic rule for the tax
In respect of the cases under discussion before the CARF,
there are several subjects in which the tax authorities have
changed recently their understanding and, while some tax
behaviours were allowed previously, later they were
disqualified by the tax authorities and taxes were charged with
qualified penalties with individuals (shareholders/directors)
held responsible for the tax assessments.
As an example, since 1997 Law No. 9.532 has stated that
taxpayers that acquire other companies with goodwill may use it
as a form to reduce their Income Tax ("IRPJ"). Those
transactions were broadly used during privatisations of public
companies in Brazil.
For many years, the administrative jurisprudence ruled the
right to deduce the goodwill was related to transactions
involving companies from different economic groups, in which
the goodwill was effectively paid in cash, even though the
incorporation was allowed through a company constituted
specifically for that (conduit companies). This was a common
transaction during privatisations.
In general, the understanding of the CARF has changed and
the tax authorities have ruled unfavourably on goodwill
amortisation related to privatisation transactions, even when
taxpayers fulfilled those previously accepted requirements.
While some foreign investors were attracted to the Brazilian
market with the tax benefits of the goodwill deduction based on
Law No. 9.532/1997, in which the prevailing jurisprudence
was favourable to them, later those companies were surprised
with the CARF’s new understanding, that maintained
huge amounts of taxes as well as penalties at the rate of 150%
and personal responsibility of its shareholders and directors.
In other words, the taxpayers have been penalised based on
similar arguments that, initially, were entirely favourable to
Another example of tax uncertainty in Brazil relates to the
thesis named "CSLL – trânsito". Several
Brazilian companies filed lawsuits in the 1990s casting doubts
on the enforceability of social contribution on net income
(CSLL) established by Law No. 7.689/88, which was declared
unconstitutional by several judges in individual lawsuits
(decisions rendered final). Thus, taxpayers have not been
obliged to collect CSLL since then.
Besides the individual decisions, aftermost the Supreme
Court ruled the CSLL constitutional, as stated by the Direct
Unconstitutionality Action No. 15 (June 2007). The
taxpayers then faced a new instability, once many of them were
not collecting CSLL. The discussion remained focused on what
decision should take precedence: the individual one (to not
collect CSLL) or the general issued by the Supreme Court (which
ruled the law constitutional and requires the taxpayers to pay
For many years, the CARF (including its highest council of
appeals) followed the Superior Court of Appeals (STJ) in order
to accept the individual decisions and to cancel the tax
assessments intending to collect CSLL. However, lately we have
seen that the Administrative Court has changed its
understanding to maintain the tax assessment of those taxpayers
who were benefited with individual decisions rendered final in
order not to collect CSLL. Once again, the CARF changed its
prevailing jurisprudence affecting previous facts, which causes
more tax uncertainty.
In light of that context, Law No. 13.655/2018 comes to
protect the taxpayers against those changes in the
jurisprudence, especially when transactions were structured in
accordance with the majority understanding at the time, but
posteriorly the Courts modify it. As exposed above,
unfortunately this a regular situation in Brazil. The attorneys
of the Federal Revenue Service have been required by CARF to
launch its opinion regarding the effects of Law
No. 13.655/2018, which remains pending.
Be that as it may, taxpayers have the right to be ruled
based on the prevalent jurisprudence applicable during its
facts. Assessments in discordance with the prevailing decisions
of the time when the facts occurred (in general, adding
qualified penalties and personal responsibility) reveal a
certain unfair procedure.
We expect that, collectively, the administrative and
judiciary tax courts, not only the CARF, will apply the rules
provided by the Law No. 13.655/2018 to secure tax legal
safety as already established by Federal Constitution and the
National Tax Code.
This article was written by Ana Paula Lui and Rafhael
Romero Bentos, partner and associate respectively at Mattos
Filho, Veiga Filho, Marrey Jr e Quiroga Advogados