The Chronic Tax Debtor and the Law That Misses Its Target

This page is a translation of the original Portuguese text, provided for convenience. It deals with Brazilian law. If there is any discrepancy, the Portuguese version prevails. Read the original in Portuguese

Complementary Law 225 of 2026, nicknamed the Taxpayer Defense Code, defines the “chronic tax debtor” (devedor contumaz) in national legislation for the first time. But the approved text leaves out many of the corporate structures that turn tax delinquency into a business model.

What the New Law Calls a Chronic Tax Debtor

The Taxpayer Defense Code treats as a chronic tax debtor any taxpayer who repeatedly fails to pay declared taxes without a justifiable economic reason and without seeking an installment plan, regularization, or an administrative challenge. The law requires a combination of systematic nonpayment, unequivocal knowledge of the debt, and the absence of adequate security, and it sets time-based parameters for what counts as repetition.

The distinction from the occasional defaulter is deliberate. A taxpayer who falls behind for one quarter, renegotiates, and pays up is not the same as one who sets up a company, operates for a few years while piling up tax liabilities, and then shuts it down to reopen under a new corporate name. The first case is a cash-flow problem. The second is a financing strategy paid for by the public treasury.

For the first time, Congress has separated the two situations in statutory text. Before, case law swung between treating the chronic debtor as an ordinary defaulter and charging the debtor under criminal tax provisions, with results that were hard to predict and costly to litigate.

Where the Yardstick Falls Short

The law’s stated target is the structural debtor, the one who turns tax evasion into a competitive advantage. But the approved text sets formal criteria that often fail to capture exactly that profile. The definition depends on declared debts, and a significant share of professionalized operations work the opposite way: they simply do not declare, they split revenue among intermediary companies, and they move money through third parties.

Another gap lies in the requirement of unequivocal knowledge of the debt. Companies with hidden partners, front-man managers, and an artificial tax domicile can claim they never received the notices, which delays the final assessment of the tax credit. A small business owner who is handed the notice of violation at the counter piles up presumptions against himself, while the sophisticated operation stalls notification for years.

There is also the escape hatch of the installment plan. Joining a regularization program, even if the taxpayer defaults on it soon afterward, interrupts the count of repetition. A cycle of joining, defaulting, and joining again, repeated over and over, empties the legal concept of chronic default of any force without the debt ever actually being paid.

Before, case law swung between treating the chronic debtor as an ordinary defaulter and charging the debtor under criminal tax provisions, with results that were hard to predict and costly to litigate.

The Safeguards the Code Preserves

Despite its limited reach, the Taxpayer Defense Code brought meaningful advances on safeguards. The law consolidated the right to self-regularization, the right to an administrative adversarial hearing before a debt is entered in the government’s active debt registry, and the right to detailed reasons for any restrictive act. It also prohibited “political sanctions,” meaning measures that make the exercise of an economic activity conditional on paying taxes under dispute, which resumes a line of reasoning already established by the Supreme Federal Court.

A taxpayer classified as a chronic debtor can challenge the classification administratively and then in court. The law requires a reasoned decision that identifies the debts considered, the assessment period, and the absence of a justifiable cause. Generic decisions based on nothing more than a spreadsheet of debts tend to be overturned.

What remains unclear is how much of this protective framework will be used by the very people the crackdown is meant to reach. A taxpayer in good standing will rarely need to invoke the Code, while the professional debtor already has the legal infrastructure to defend itself. The risk is that the safeguards end up concentrated where enforcement is also concentrated: on smaller taxpayers, who feel the weight of the yardstick without having the tools to use it in their favor.

Frequently Asked Questions

Who can be classified as a chronic tax debtor under Complementary Law 225 of 2026?

A taxpayer can be classified as a chronic debtor if he or she repeatedly fails to pay declared taxes without a justifiable economic reason, without seeking an installment plan or an administrative challenge, and with unequivocal knowledge of the debts. These elements must be present together throughout the period set by law. A single instance of nonpayment, or an isolated delay followed by voluntary regularization, is not enough.

What safeguards does a classified taxpayer keep when challenging the classification?

The taxpayer has the right to an administrative adversarial hearing beforehand, to detailed reasons for the act that classifies him or her, to a specific identification of the debts considered, and to judicial review of the decision. The law prohibits political sanctions that prevent the exercise of an economic activity because of a tax under dispute, and an administrative decision that does not individualize the basis for the classification tends to be overturned for inadequate reasoning.

Why is it said that the new law may not reach the professional debtor?

Because the legal concept depends on declared debts and on unequivocal knowledge of the notices. More sophisticated operations get around those requirements by not declaring at all, by using intermediary companies, hidden partners, and an artificial tax domicile. Repeatedly joining installment plans, even when the taxpayer then defaults on them, also interrupts the count of repetition, which lets the cycle of nonpayment continue without the classification the law provides for.

18/05/2026

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.