Internal Revenue Service creates Cooperative Fiscal Compliance Program pilot project in Brazil

The Brazilian Internal Revenue Service (“RFB”) published Ordinance no° 28, on the 15th of April 2021, establishing the pilot project for the new Cooperative Fiscal Compliance Program (“Confia”), which has the aim to create cooperation between federal tax authorities and entities representing the largest taxpayers in Brazil.

The program follows the models proposed by the Organization for Economic Cooperation and Development (“OECD”) and the Tax Administration Diagnostic Assessment Tool (“TADAT”), since tax compliance for large companies is already something adopted by OECD member countries, even though there is no standard international model.

However, as this type of action is not provided for in the Brazilian tax legislation institution, there will be a need to adapt to the characteristics of Brazilian taxpayers and the RFB itself.

The Program will feature a code of good tax practices drawn up by the RFB, and also a fiscal control framework, through which the relationship between tax authorities and taxpayers will be established, highlighting the fact that adherence to the program is voluntary.

Similar programs have already been initiated by the RFB, such as the Regional Tax and Customs Compliance Program (“PRC”) in the states of Rio de Janeiro and Espírito Santo. On another occasion, in the state of São Paulo, the São Paulo Tax Compliance Program has been established, an opportunity in which the RFB “created” a classification of taxpayers according to their “percentage of risk” for the tax authorities – which raises the flag for contributors to evaluate any ratings made by the Confia Program.

In the case of the São Paulo Tax Compliance Program, due to this classification, taxpayers needed to call the Judicial Branch to reduce and even prevent the continuous inspections being carried out, so that they could organize themselves internally and regularize their situation with the tax authorities.

The Confia Program already has a Management Committee, which will be chaired by the Special Secretary of the Federal Revenue and, alternatively, by the Undersecretary General. The Executive Secretariat, in turn, will be exercised by the Special Coordination of Largest Contributors (“COMAC”).

The group of project leaders currently includes the RFB itself, the Brazilian Association of Publicly-Held Companies (“Abrasca”), the Brazilian Federation of Banks (“Febraban”) and the Applied Tax Studies Group (“Getap”).

“From what can be seen in international experiences, depending on how everything will be designed, the project may represent a good opportunity to reduce the tax liability of large companies, since cooperation between both parties in the legal-tax relationship can prevent partial interpretations by the RFB, which consequently results in a reduction of judicialization and greater legal certainty”, commented Camila Cabral, tax consultant at Drummond Advisors.

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