Originally published in the September 1, 2010 edition of World Tax Daily (Copyrights Tax Analysts)
Brazil’s Federal Revenue Department (FRD) on August 26 published Normative Instruction 1067/2010, which regulates the application of penalties for tax credit (setoff) and refund requests that have been rejected by the tax administration.
The instruction regulates article 62 of Law 12,249 of June 11, 2010, which resulted from the conversion of Provisional Measure 472/2009 into law.
The instruction provides for an assessed penalty of 50 percent of the credit claimed in a request for a tax setoff if the relevant request is rejected by the FRD. Before Law 12,249/2010, the penalty was 75 percent.
If a request for a tax credit is approved but the FRD later concludes that the request was based on false information, the applicable penalty triples to 150 percent of the amount at issue. (The FRD has five years to review a tax credit.) If a taxpayer requesting a tax credit fails to provide additional documentation requested by the FRD, that failure will be treated as an obstruction and the penalty will be increased by 50 percent.
The instruction also provides for an assessed penalty, which previously did not exist, for undue tax refund requests. A taxpayer whose tax refund request is rejected by the FRD will be subject to an assessed penalty of 50 percent of the claimed tax refund. If a refund is made and the FRD later concludes that the refund was based on false information, the penalty doubles to 100 percent of the refunded tax. (As with the tax credit, the FRD has five years to review a tax refund.)
David Roberto R. Soares da Silva