COSIT[1] published on 04 December, of 2018 their Normative Opinion No. 2(PN COSIT No. 2/2018), with the purpose to guide the actions of the Brazilian Internal Revenue Services (Receita Federal do Brasil – RFB) in the application of Law No. 13,670, of 2018 (Law No. 13,670/18), which prevents the offset of credits on payments of Corporate Income Tax (IRPJ) and Social Contribution on Net Profits (CSLL), ascertained by the estimate regime.

 Law No. 13,670/18, issued as a result of the cash difficulties faced by the Brazilian Government, amended the paragraph 3 of article 74 of Law No. 9,430, of 1996 (Law No. 9,430/96). The amendment expanded the list of prohibitions on credits offsetting by taxpayers with debts of the same nature administered by the RFB.

As a result of the publication of Law No. 13,670/18 lawsuits have been filed, mainly raising the argument on the offense of the Principle of Prospective Application, since the option of the payment by the estimate regime had been adopted by taxpayers by the occasion of the payment of the first installment of such taxes, until 28 February, of 2018, when the offset was still allowed. AnIn Brazilian legal system it is not allowed to change the regime of payment during the same tax year.

With the issue of PN COSIT nº 2/2018, RFB reinforces the understanding that the debts of IRPJ and CSLL, ascertained by the estimate regime, could be subject of total or partial offset, by means of the Declaration of Offsets (DCOMP), only until 31 May, of 2018, date on which the law came into force.

With the aforementioned amendment and now, in accordance with the PN COSIT nº 2/2018, the taxpayer who proceeded with the offset after 31 May, of 2018 will have their DCOMP considered null. Given this scenario:

1. the amounts considered undeclared, during the current calendar year, are subject to the isolated fine, whose penalty is of 50%, as set forth by art. 52 of Normative Instruction of RFB No. 1,700, of 2017; and
2. the amounts considered undeclared, after the end of the calendar year, will be disallowed. In this case there is the application of the ex-officio fine of 75%, in accordance with art. 44 of Law No. 9,430/96.

There is still a discussion if it is possible, under the same facts, the application of isolated fine referred in item (i) and the ex-officio fine referred on item (ii) above. Despite the current tax discussions or others that may come from the application of Law No. 13,670/18, the PN COSIT nº 2/2018 binds all agents of the RFB.

Please, if necessary, contact us for further clarification:

zaslaw@zaslaw.com.br

[1] Cosit: Coordenação-Geral de Tributação, the Brazilian Internal Revenue Services’ branch in charge of standardize IRS’s opinions.