(free translation)
The Federal Revenue Service (Brazilian IRS) has been issuing Infraction Notices requiring a fine of 50% on the amount of non-approved offsets, including those in which the administrative discussion is still ongoing. In other words, companies are being notified with the imposition of a fine for a compensation not recognized by the tax authorities, but whose merits are still under discussion in the administrative courts.
It is worth noting that the unapproval of an offsetting statement can occur either because of divergent interpretations of the tax rule or because of simple inconsistencies regarding the information sent to the Brazilian IRS (difficulty in proving the existence and sufficiency of the credit).
However, this does not mean that the credit claimed is undue, much less that the company has committed an unlawful act.
In general terms, this notice must be objected for two main reasons:
1) The credit informed in the offset statement is under discussion and may be confirmed at the time of the final judgment by the administrative courts. The logic is simple: if the taxpayer is successful in proving that it holds the credit informed in the offset statement, the infraction notice with the requirement of the “isolated fine” ought to be cancelled.
2) The application of the “isolated fine” ends up limiting a right of the taxpayer ensured by law: the offsetting request is a statutory right (article 74 of Law nº 9.430/96) and is a legal act of the taxpayer. Therefore, the imposition of the “isolated fine” ends up punishing the taxpayer for the regular exercise of a right as if it were an illicit act. This requirement violates the constitutional right to petition, due legal process, ample defense and adversary proceedings.
The invalidity and abusiveness of the imposition of the “isolated fine” is evident, especially when considering that, in the vast majority of cases, there is no unlawful act of the taxpayer, but only divergence of normative interpretation or information provided to the Federal Revenue.
Lauffer has extensive experience in the administrative and/or judicial defense of Infraction Notices that require the payment of the “isolated fine”.
We recommend that the notified company contact our firm so that we can analyze the case and provide guidance in order to reverse the assessment, either administratively (defense before the administrative courts) or judicially (filing of a specific lawsuit).
