Complementary Law No. 160 brings changes in validation of State tax benefits

The Complementary Law No. 160 (CL 160), published in the Official Gazette of Aug-08-2017, is an attempt to end the fiscal war between states, as it brings changes to their tax benefits validation.

The law provides for an agreement allowing the states and the Federal District to resolve on the remission of tax credits, assessed or non-assessed, from exemptions, incentives and fiscal or financial-fiscal benefits established in disagreement with the provisions in section "g", of item XII, of paragraph 2, from Article 155 of the Federal Constitution and for the reestablishment of their respective exemptions, incentives and fiscal or financial-tax benefits.

Mentioned exemptions, incentives and fiscal or financial-fiscal benefits are those granted by the States, uncontrolled by the National Council of Treasury Policy - CONFAZ, not being in accordance with Complementary Law No. 24/75, which establishes that only the benefits authorized by agreements unanimously approved by the 26 States and the Federal District are valid.

Settlement of benefits

In order to settle the tax benefits, the States should contact CONFAZ until the effective date of CL 160 (within 180 days from the publication) to have signed, approved and confirmed an Covenant for these benefits that the State aims to validate.

Conditions for approval

The minimum required for approval and ratification of the Covenant is two-thirds of the Federal Units representing a minimum of one-third of States members from the five regions of Brazil.

After approval, the State shall:

1) publish in its Official Gazette a list with all the normative acts granting fiscal benefit in the State and covered by the Covenant and;

2) To register and deposit the supporting documents corresponding to the concession acts of tax benefits at CONFAZ Secretariat, which shall be published at Taxes Transparency National Portal, which remains to be created.

Deadline for benefits

Granting new benefits or extending the existing ones may not exceed the deadlines described in CL 160, which should vary according to the activity benefited, as follows:

Forgiveness of tax credits

CL 160 allows for the forgiveness of tax credits from assessments based on benefits granted in default of CONFAZ, and the penalties provided in Article 8, of Complementary Law No. 24/1975, retroactively to the original granting date of exemption, incentive or fiscal or financial-fiscal benefit. However, repayment and offsetting tax and late misappropriation of credit by the taxable person are prohibited.

Penalties

States that grant or maintain exemptions, incentives and fiscal or financial-fiscal benefits in disagreement with the rules established in Complementary Law 160 will be subject to sanctions such as the interruption of voluntary transfers of other entities of the federation and the prohibition of contracting credit operations. Such penalties depend on reception of complaint another State or of Federal District by the Ministry of Finance.