The individual tax transaction is a sub-modality of the collection transaction aimed at negotiating credits registered in the federal active debt, and is provided for by Law 13.988/2020which is is regulated by Administrative Rule no. PGFN 6,757/2022.

The individual transaction may be proposed either by the Public Treasury or by the taxpayer, provided the latter is qualified for the following conditions: (i) debtors whose consolidated amount of the debts enrolled in the federal past-due liability roster exceeds ten million reais (R$10,000,000.00) or whose consolidated amount of the debts enrolled in the FGTS (service time guarantee fund) past-due liability roster exceeds one million reais (R$1,000. 000.00 (one million reais); (ii) debtors that are bankrupt, under judicial or out-of-court reorganization, under judicial or out-of-court liquidation or under out-of-court intervention; (iii) federal public agencies, foundations and companies; (iv) States, Federal District and Municipalities and their public-law indirect administration entities; and (v) debtors whose consolidated value of the debts is over R$ 1. (v) debtors whose consolidated debts exceed one million reais (R$1,000,000.00) registered in the federal past-due liability roster or one hundred thousand reais (R$100,000.00) registered in the FGTS' past-due liability roster and that are suspended by court order or guaranteed by attachment, surety letter, or guarantee insurance.

The transaction may involve, at the discretion of the Attorney General of the National Treasury, some concessions favorable to the taxpayer, as follows (i) offering of discounts and the use of credits from tax losses and negative calculation basis of the Social Contribution on Net Profits (CSLL) to the debts considered irrecoverable or difficult to recover by the Attorney General Office of the National Treasury; (ii) the possibility of installment payment and deferment or moratorium; (iii) relaxation of the rules for acceptance, assessment, substitution and release of guarantees and of the rules for seizure or disposal of assets; and (iv) the possibility of using liquid and certain credits of the taxpayer against the Federal Government, acknowledged in a final and unappealable decision, or of own or third-party federal writs of payment (precatórios federais), for the purposes of amortization or settlement of the transacted debit balance.

However, as advantageous as it may seem, adhering to settlement agreements should be done with caution, analyzing the debtor's real payment capacity and viability to settle the installments, as a whole, since there are risks to be considered in case of eventual rescission of the transaction.

Article 69 of PGFN Directive no. 6,757/2022 sets forth the events that give rise to the rescission of the transaction agreement, and if any of the listed causes is perpetrated, the debtor is forbidden to formalize a new transaction, even if referring to different debts, for a period of 2 years.

Once the feasibility of fulfilling the agreement's obligations and conditions is verified, if it is in the debtor's interest to make a proposal to the National Treasury, it must contain a statement of the concrete causes of its economic, asset, and financial situation, the reasons for its economic and financial crisis, and its estimated payment capacity, in addition to the presentation of a tax recovery plan with a description of the means for extinguishing the credits enrolled in the federal and FGTS' active debt, duly instructed with the documents that will provide the necessary backing.

The individual transaction proposal will be submitted through the REGULARIZE system and will be examined by the National Treasury Regional Attorney's Office of the tax domicile of the taxpayer's head office, and, in the event the requirements are not met or the necessary documents are not submitted, the taxpayer will be given the opportunity to remedy the defect within 10 days.

If the taxpayer's individual transaction proposal is rejected, the Public Treasury must explain the reasons for the rejection, as well as indicate alternatives and guidelines for the regularization of the taxpayer's tax situation and, whenever possible, formulate a counterproposal for a transaction.

It is also up to the taxpayer, if he wishes, to appeal administratively against the decision that rejects the proposal, and he will have a period of 10 days from the date he is notified of the decision.

The individual transaction proposal formulated by the Attorney General of the National Treasury, on the other hand, will be made electronically or by mail and must indicate the means for the extinguishment of the credit contemplated therein and, as with the transaction presented by the taxpayer, the taxpayer will be allowed to indicate a counterproposal to the Treasury.

In a critical analysis, it can be said that the possibility of customizing the transaction proposal is a good alternative to reduce the litigiousness and slowness of the fiscal executive process, in a way that individualizes the negotiations according to the taxpayer's particularities who, for various reasons, would not find in the transaction by adhesion the possibility of regularizing their debts with the Public Treasury, increasing the prospects of recovering credits from the Federal Government to the public coffers.

Also, it is worth mentioning the recent Administrative Rule published by the Attorney General Office of the National Treasury, PGFN/ME no. 8,798, which allows the use of credits from tax losses and negative calculation basis of the Social Contribution on Net Profits (CSLL) for the early settlement of amounts included in transactions of irrecoverable tax credits or those that are difficult to recover.

The possibility of using tax losses and the negative tax base of the CSLL shows itself as a great advantage to the taxpayer, since the companies will no longer need to disburse cash in full to pay off the installments of the transaction agreements, being able to use such amounts to maintain their business activity; on the other hand, the program also brings benefits to the National Treasury, in the sense that it will facilitate transactions that, even in cases such as the exceptional transaction or, depending on the terms, the individual transaction itself, in which discounts are granted, were not sufficient to enable the payment of debts by the taxpayer and the recovery of credits by the tax authorities.

Finally, it is important to note that, in the specific case of an individual transaction agreement, entered into based on PGFN Directive No. 9,917/2020 or PGFN Directive No. 6,757/2022, the debt balance may be settled in advance as long as the traded credits are classified as irrecoverable or difficult to recover, and, in the case of a transaction entered into by a debtor under judicial reorganization, under PGFN Directive No. 2,382/2021.

These are instruments that substantially improve the traditional conditions for negotiating tax debts with the PGFN and, although they can always be improved, they should be celebrated. One cannot fail to recognize, however, the indispensable learning curve that is naturally imposed in the case of new institutes such as the individual tax transaction. Regardless of this, these instruments have been and certainly will continue to be sought as means of regularizing the tax liabilities of companies, and the search for a solution built jointly between the creditor and the debtor is always healthy.

By: Júlia Farina Dalpiaz
Tax Law | CPDMA Team