Court decision allows taxpayer to renegotiate a debt previously classified as “irrecoverable” and benefit from more favorable conditions under Brazil’s Taxpayer Legal Framework

A retail company obtained a favorable ruling from the Federal Court allowing it to reclassify an ICMS (Tax on the Circulation of Goods and Services) debt that had been recorded in Brazil’s federal active debt registry as “irrecoverable.” With the reclassification to “high recovery probability,” the company became eligible for a more advantageous tax settlement program, resulting in a reduction of approximately R$ 1.7 million in the total amount due.

The case involved the Office of the Attorney General of the National Treasury (PGFN), which had initially classified the debt in a category with limited access to discounts and extended payment terms. The company challenged the classification based on Law No. 13.988/2020 (the Brazilian Taxpayer Legal Framework), arguing that it had both the financial capacity and genuine interest in regularizing its fiscal situation.

The 6th Federal Court of Campinas ruled that the classification made by the PGFN must be based on objective and reasonable criteria. Failure to do so could unduly restrict the taxpayer’s right to benefit from the legal mechanisms for tax regularization. The judge therefore ordered the reclassification and authorized the taxpayer’s inclusion in a more favorable settlement program.

The ruling underscores the importance of transparency and fairness in taxpayer-fiscal authority relations, and highlights the strategic value of judicial review when administrative discretion is exercised in a way that undermines legal rights.

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Source: https://valor.globo.com