On July 12th, the Brazilian Congress approved and remitted for presidential approval a Bill of Law dealing with the legalization of tax benefits granted irregularly by the States and the Federal District (without the approval of CONFAZ), as well as the reinstitution of the respective benefits. From this date on (July 12, 2017), the President has 15 days to formally approve it or reject it. In case the President is silent within such period of time, the approval is tacit.
The text approved by the Congress has the purpose of settling controversies arising from illegal tax benefits by means of the enactment of a specific agreement by CONFAZ, authorizing the States to grant:
- the forgiveness of tax liabilities arising from illegal tax benefits ;
- according to the type of economic activity for which the benefits are intended, the reinstatement, for a limited period of time, of the illegal benefits that are still in force.
Under the terms of the Bill of Law, such agreement does not require unanimous adherence of the States and the Federal District at CONFAZ; rather, a quorum of two-thirds of the States shall be sufficient, provided that there be at least one-third approval of the States of each one of the five regions of Brazil. In addition, the States are allowed to grant to their taxpayers tax benefits available at their neighbors’ legislation (i.e., within the same region) without the need for authorization by CONFAZ.
Finally, the proposal also provides that provide that the ICMS benefits granted to companies enrolled at the real profit regime are to be considered investment incentives and, consequently, should be excluded from the tax calculation bases of IRPJ, CSLL, PIS, and COFINS.