Brazil Issues New Regulation to Expedite Federal Tax Refunds
- Brazil
- 07/15/2010
- Azevedo Sette Advogados
Originally published in the July 12 edition of World Tax Daily (Copyrights Tax Analysts)
Brazil’s official gazette of June 17 published Ministry of Finance Ordinance (Portaria) No. 348/2010, which provides new special procedures designed to expedite tax refunds for exporters.
Ordinance No. 348/2010 creates a special procedure for refunds of:
- the Program for Social Integration contribution (P.I.S.) and the Contribution for the Financing of Social Security (COFINS) related to tax credits from costs, expenses, and allowances connected to export income as long as they have not been deducted or used by the taxpayer; and
- the federal excise tax (IPI) credit balance at the end of each quarter generated from acquisitions of raw materials, intermediate products, and packaging materials used in manufacturing activities that the taxpayer has not applied to IPI debits on outputs.
The ordinance provides that the Federal Revenue Department (FRD) must pay 50 percent of the claimed tax refund within 30 days of the date the refund claim was filed as long as the taxpayer:
- is in good standing, meaning holds a federal tax clearance certificate;
- has not been subject to a special tax audit procedure 1;
- is required to adopt Digital Tax Bookkeeping 2;
- has carried out exports in all four years preceding the year the tax refund claim was filed; and
- has not been denied a tax refund claim or tax setoff claim within 24 months prior to the filing of the tax refund claim under the new special procedure.
Ordinance No. 348/2010 also states that the taxpayer’s refund claim — which may take up to five years to be fulfilled — will be subject to a full review. A taxpayer that claims an undue refund in excess of 50 percent of the refund advanced under the ordinance’s special procedure will be subject to penalties of up to 50 percent regardless of the obligation to refund the government.
The new tax refund procedure applies for refund claims filed as of April 1, 2010. The FRD may issue further regulations.
Comments
Although the government enthusiastically announced the new special tax refund procedure as a way to expedite tax refunds for the export sector, exporters and observers are skeptical that it will actually work. The five conditions imposed for the advance of 50 percent of the refund claim are very difficult to meet. Also, most small exporters are by default excluded from the procedure because they are not yet subject to Digital Tax Bookkeeping.
Footnotes
1 Special tax audit procedures (Regime Especial de Fiscalização, or REF) apply in situations legally deemed as harmful to the tax administration, many of them related to the obstruction, by the taxpayer, of regular tax audit procedures.
2 Digital Tax Bookkeeping includes database information used for tax purposes, such as products, supplier and client lists, tax documents, inventory, and accounts payable and receivable. Some taxpayers are required to electronically report such information to the FRD on a monthly basis.
David Roberto R. Soares da Silva, tax partner, Azevedo Sette
