Angelo Ambrizzi
Lawyer at Marcos Martins Advogados
The PGFN, through Ordinance 14.402/2020[1], established new rules for adherence to the exceptional transaction, a measure aimed at overcoming the economic and financial situation caused by the coronavirus (COVID-19), aimed at those who have debts registered as active debt of the Union.
The exceptional transaction will include debts administered by the Attorney General’s Office of the National Treasury, even in the execution phase or the subject of a previously terminated installment plan, with or without suspended enforceability, whose updated value to be negotiated is equal to or less than R$150,000,000.00 (one hundred and fifty million reais).
For the purposes of adhering to the exceptional transaction, the degree of recoverability of the debts owed to the PGFN will be taken into account, and the economic situation and payment capacity of the debtors will be verified by checking the registration, asset or economic-fiscal information provided by the debtor or by third parties to the Public Administration bodies
All this verification will be done to ensure that the taxpayer who joins the exceptional transaction has the economic capacity to make the payments.
In addition, it will be checked whether the company has actually been affected by the coronavirus (COVID-19), which will be determined by analyzing any reduction in gross revenue in 2020, starting in March and ending in the month immediately preceding the month of adhesion, compared to the sum of monthly gross income for the same period in 2019.
The terms and discounts offered for settling debts through the extraordinary transaction will be graduated according to the possibility of paying off the debts, subject to the limits set out in the transaction legislation.
Subsequently, the debts will be classified according to their degree of recoverability:
Type A: debts with a high prospect of recovery;
Type B: debts with a medium prospect of recovery;
Type C: debts considered difficult to recover; or
Type D: debts considered irrecoverable.
Caution is advised when analyzing which type of transaction to join, as the rules are complex.
Individual entrepreneurs, micro-enterprises, small businesses, educational institutions, Holy Houses of Mercy, cooperative societies and other civil society organizations covered by Law 13.019/2014 may join the exceptional transaction.
These companies will be able to join the transaction as long as their debts are considered Type C (difficult to recover) or Type D (irrecoverable)
In this modality, the down payment will be equivalent to 4% of the consolidated value of the debt, divided into up to 12 installments, and the remainder paid with a reduction of up to 100% of the value of interest, fines and legal charges in up to 133 monthly installments, with each installment determined by the highest value between 1% of the gross revenue of the previous month and that corresponding to the division of the consolidated value by the number of installments requested.
Discounts will be limited to between 70% and 30% of the total value of the debts, depending on the number of installments requested
Other legal entities will be able to join the transaction for debts considered Type C (difficult to recover) or Type D (irrecoverable).
In this modality, the down payment is equivalent to 4% of the consolidated value of the debt, divided into up to 12 installments, and the remainder paid with a reduction of up to 100% of the value of interest, fines and legal charges in up to 72 monthly installments, with each installment determined by the highest value between 1% of the gross revenue of the previous month and that corresponding to the division of the consolidated value by the number of installments requested.
Discounts will be limited to between 50% and 35% of the total amount of debts, depending on the number of installments requested.
For individuals, membership must cover debts considered Type C (difficult to recover) or Type D (irrecoverable)
The down payment will be equivalent to 4% of the consolidated value of the debt, divided into up to 12 installments, and the remainder paid with a reduction of up to 100% of the value of interest, fines and legal charges in up to 133 monthly installments, with each installment being determined by the highest value between 5% of the gross revenue of the previous month and that corresponding to the division of the consolidated value by the number of installments requested.
Discounts cannot represent more than 70% of the total amount of the debt.
For individual entrepreneurs, micro-enterprises, small businesses, educational institutions, Santas Casas de Misericórdia (Holy Houses of Mercy), cooperative societies and other civil society organizations referred to in Law 13.019/2014, in the process of judicial recovery, judicial liquidation, out-of-court liquidation or bankruptcy that have debts considered Type A (high prospect of recovery), Type B (medium prospect of recovery), Type C (difficult to recover) or Type D (irrecoverable), the rule is as follows:
The down payment will be equivalent to 4% of the consolidated value of the debt, divided into up to 12 installments, and the remainder paid with a reduction of up to 100% of the value of interest, fines and legal charges in up to 133 monthly installments, with each installment being determined by the highest value between 1% of the previous month’s gross revenue and that corresponding to dividing the consolidated value by the number of installments requested.
Discounts cannot represent more than 70% of the total amount of the debt.
For other legal entities in the process of judicial recovery, judicial liquidation, extrajudicial liquidation or bankruptcy with debts considered Type A (high prospect of recovery), or Type B (medium prospect of recovery), Type C (difficult to recover) or Type D (irrecoverable), the down payment will be equivalent to 4% of the consolidated value of the debt, divided into up to 12 installments, and the remainder paid with a reduction of up to 100% of the value of interest, fines and legal charges in up to 72 monthly installments, with each installment being determined by the highest value between 1% of the previous month’s gross revenue and that corresponding to dividing the consolidated value by the number of installments requested.
Discounts may not represent more than 50% of the total amount of the debt.
In the case of social contributions provided for in item “a” of subsection I and subsection II of the caput of art. 195 of the Constitution, the installment period referred to in the caput, after the down payment has been paid, will be up to 48 (forty-eight) months.
The minimum amount of the installments will be:
I – R$ 100.00 (one hundred reais), in the case of natural persons, individual entrepreneurs, micro-enterprises or small businesses;
II – R$ 500.00 (five hundred reais), in other cases.
Accessions will be made exclusively by agreeing to the proposal made by the Attorney General’s Office of the National Treasury, with the taxpayer having between July 1 and December 29, 2020 to consolidate.
Interested parties will also be required to provide information such as gross revenue, the number of employees (with formal ties), the number of monthly admissions and dismissals in 2020, the number of employment contracts suspended in 2020, and the total value of the legal entity’s assets, rights and obligations in the month prior to joining.
The transaction will be terminated when:
- I – non-compliance with the conditions imposed by Ordinance no. 14.402/2020;
- II – fails to pay three consecutive or alternate installments of the outstanding balance negotiated under the terms of the accepted settlement proposal;
- III – if the Attorney General’s Office finds that the debtor’s assets have been emptied as a way of defrauding compliance with the transaction, even if this was done before the transaction was entered into;
- IV – in the event of bankruptcy or liquidation of the transacting legal entity;
- V – failure to comply with any of the provisions of the Law governing the transaction.
It is possible to see that this is a great opportunity to settle any debts registered as overdue, but a thorough analysis is needed to identify which method is best suited to the reality of each company.
Marcos Martins Advogados makes its tax team available to answer any questions on the subject.
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[1] BRAZIL. PGFN Ordinance No. 14402, of June 16, 2020. Establishes the conditions for exceptional transactions in the collection of the Union’s active debt, due to the effects of the pandemic caused by the coronavirus (COVID-19) in the perspective of receiving registered credits. Federal Official Gazette, June 17, 2020.
