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MP 899 needs refining before it can improve Brazilian tax transactions

Júlio de Oliveira, Paulo Rogério G. Ribeiro and André Affonso Amarante of Machado Associados discuss the effectiveness of the latest measure related to tax transactions in Brazil.


On October 16, 2019, the federal executive branch issued Provisional Measure (MP) No. 899 to establish conditions related to tax transactions. The purpose of the measure is to improve current regulation and methods for the settlement of tax disputes between the federal government and taxpayers, as provided for in the National Tax Code. Taxpayers currently may negotiate conditions such as penalty and interest discounts, terms and forms of payment, on transactions.

MP 899 can be seen as a commendable act, as it may (i) relieve the Brazilian Courts – which has a backlog of lawsuits without expectation of a prompt and definitive resolution; (ii) represent a way to increase federal tax collection; and (iii) reduce the indebtedness of individuals and companies.

However, in spite of the innovations brought forward by MP 899, the wording of the measure requires adjustments, changes and refinements that, in our view, should be implemented before its conversion into law. The broad debate between the federal government and taxpayers about the subject of the tax transaction is welcomed, especially with publicity, representativeness and participation in defining the variables. 

It can be argued that the unilateral proposal of the Minister of Economy and the mere adhesion of the taxpayer are incorrect ways of materialising the tax transaction. MP 899 prevents the active participation of other interested parties in the formulation of transaction proposals, mainly interlocutors of taxpayers, such as the Order of Attorneys of Brazil (OAB), associations, trade union confederations, and trade associations. The lack of participation of the company in the transaction process may strip the mechanism of its main characteristics, subjecting unilateral proposals to questions of all kinds that may frustrate the tax transaction.

MP 899 also fails to objectively address specific requirements that make a legal discussion relevant and widespread, which in itself is a problem capable of stifling the materialisation of the tax transaction. Firstly, the use of the conjunction “and” in the wording of MP 899, instead of the alternative conjunction “or”, significantly limits tax disputes that may be the subject of a transaction, as the legal controversy may be relevant but not widespread and vice versa. Secondly, it is common for certain tax discussions to be restricted to a particular sector of the economy. When these restrictions exist, this measure could be interpreted as being devoid of dissemination; when it should be relevant to the federal government and to taxpayers.

Moreover, the executive branch has committed an error in authorising the federal government to file for taxpayer bankruptcy in the event of the termination of a transaction. In addition to being inconvenient, such a matter should not be dealt with by means of a Provisional Measure. Furthermore, it affronts case law that rules out the possibility of the federal government filing for bankruptcy in cases where the taxpayer is not interested in the bankruptcy proceedings.

As the executive branch’s initiative to regulate tax transactions at federal level is commendable, there is little doubt that MP 899 deserves to have its content implemented. Following broad discussion in society and from the National Congress, a final agreed version can effectively encourage the federal government and taxpayers to use this important instrument for tax debt relief and dispute settlement.


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