Brazil: PRORELIT, CSLL Within International Treaties And Tax Planning Statements: Conversion Of Provisional Measure No. 685/2015 Into Law No. 13,202/2015

On December 8, 2015, law No. 13,202 was published, as a result of the conversion of Provisional Measure No. 685/2015 into law. In addition to providing for the Program for Reduction of Tax Litigation (PRORELIT, for its acronym in Portuguese), said law addressed issues such as the scope of double taxation treaties with respect to the Social Contribution on Net Income (CSLL).

Regarding the PRORELIT, the law merely reaffirmed the provisions of the Provisional Measure from which it originates, preserving the text that created this Program, which allows companies to use a portion of their tax losses and of the CSLL negative base – generated through December 31, 2013 and declared by June 30, 2015 – to settle tax liabilities with the Federal Revenue Service or with the Office of the Attorney General to the National Treasury. The liabilities that can be offset must have become due until June 30, 2015 and must be currently under administrative or judicial discussion. Interestingly, due to the delay in the processing of the Provisional Measure by Congress, the deadline for companies to adhere to the Program ended on November 30, 2015, prior to the publication of the law itself.

With respect to double taxation treaties, the law introduced an important interpretative provision in declaring that these treaties – which, according to tax authorities and some administrative decisions, encompassed only the income tax, in all of its modalities – now also cover the CSLL. It is a very important measure to provide legal certainty and reduce tax litigation on the subject. Few treaties contained express provisions in this regard, such as the ones signed with Belgium and Portugal.

Another aspect that should be highlighted concerns the inexistence, in Law No. 13,202/2015, of provisions contained in Provisional Measure No. 685/2015 regarding the need to file statements with the Federal Revenue Service with the sole purpose of providing information on plans used to pay less tax.

Our tax practice group is at your disposal to further discuss any questions regarding the provisions of said law.