Tax Crimes: Tax Evasion and Extinction of Criminal Liability

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

Tax evasion can lead to a criminal conviction with a sentence of up to five years of imprisonment (reclusão), but paying the tax in full, even after the indictment has been filed, extinguishes the defendant’s criminal liability. Knowing the legal milestones and the right procedural moment can make the difference between an acquittal and having your name entered on the roll of the guilty.

What counts as tax evasion under Brazilian law

Law 8.137/1990 defines crimes against the tax system and, in Article 1, lists the specific acts that constitute tax evasion. They include withholding information from the tax authorities, entering inaccurate data in a tax document, forging an invoice, and refusing to provide a document to the tax authorities. The penalty ranges from two to five years of imprisonment (reclusão), plus a fine.

Article 2 of the same law covers formal crimes, which are complete even if no tax is actually evaded. This category includes failing to remit contributions withheld from an employee’s pay and making a false declaration to avoid payment. The penalty is milder: six months to two years of detention (detenção).

The distinction between material and formal crimes has important practical consequences. For material crimes, Binding Precedent 24 of Brazil’s Supreme Federal Court (Supremo Tribunal Federal) provides that no crime exists until the tax has been finally assessed at the administrative level. This means that while an appeal is pending before the Federal Revenue Service (Receita Federal) or a taxpayer appeals council, the Public Prosecutor’s Office (Ministério Público) cannot file an indictment.

When the tax authorities can refer a case for prosecution

Law 9.430/1996, Article 83, governs tax referrals for criminal purposes. It provides that the evidence of a tax crime may be sent to the Public Prosecutor’s Office only after the administrative tax proceeding has ended and the tax debt has been finally established. Before that point, any indictment lacks probable cause.

Defense teams often overlook this point. Taxpayers are frequently caught off guard by a police summons or a criminal citation while an administrative dispute is still underway. In those situations, the proper technical approach is to show that an objective condition for prosecution is missing, and to ask the court to dismiss the criminal case through a habeas corpus petition or in the response to the charges.

The case law of the Superior Court of Justice (Superior Tribunal de Justiça) has established that a pending administrative appeal also suspends the statute of limitations for a material tax crime. The defense therefore gains time and an opportunity to resolve the tax situation before criminal prosecution actually begins.

Knowing about this mechanism changes defense strategy. Instead of focusing exclusively on gathering evidence or disproving intent, the defense can also work on whether it is financially feasible to pay off the debt, even after sentencing, as a way to extinguish criminal liability.

This category includes failing to remit contributions withheld from an employee’s pay and making a false declaration to avoid payment.

How extinction of criminal liability ends the criminal case

Article 9 of Law 10.684/2003 provides that paying the tax and its accessory charges in full, before the indictment is accepted by the court, extinguishes criminal liability for the crimes defined in Articles 1 and 2 of Law 8.137/1990 and in Articles 168-A and 337-A of the Criminal Code. An installment plan, in turn, suspends the State’s power to punish for as long as the debt is being paid regularly.

Law 11.941/2009 considerably broadened this benefit. Article 69 allows criminal liability to be extinguished by full payment at any time, even after a conviction has become final and unappealable. The Supreme Federal Court and the Superior Court of Justice apply this rule, based on the underlying criminal policy: the State prefers to collect the tax rather than impose a custodial sentence.

In practice, the procedure requires submitting documentary proof of payment to the competent court. The defendant or convicted person must file a petition with a copy of the payment slip, a clearance certificate showing no outstanding debts for the relevant tax, and a statement issued by the National Treasury Attorney’s Office (Procuradoria da Fazenda Nacional) or by the state or municipal tax authority. Once the documents are received, the judge declares criminal liability extinguished and closes the case, regardless of the procedural stage it has reached.

Joining a special installment program, such as REFIS (a Brazilian tax debt refinancing program) and its successors, immediately suspends the State’s power to punish. If the taxpayer keeps the payments current until the debt is paid off, criminal liability is extinguished at the end. If the taxpayer is later removed from the plan, however, the criminal case resumes, which is why the defense must closely monitor the installment payments.

Frequently Asked Questions

Can a person accused of tax evasion be placed in pretrial detention?

Pretrial detention in tax crime cases is an exceptional measure and requires concrete grounds meeting the requirements of Article 312 of the Code of Criminal Procedure. The case law holds that the mere commission of the crime, even repeatedly, does not justify precautionary custody. Detention is allowed only where objective evidence shows a real risk to the criminal investigation, flight, or serious continued criminal conduct. As a rule, defendants face trial while free.

What is the difference between tax avoidance, tax evasion, and tax fraud?

Tax avoidance (elisão fiscal) is lawful tax planning, in which the taxpayer uses gaps in the law to reduce the tax burden before the taxable event occurs. Tax evasion (evasão fiscal) and tax fraud (sonegação) involve unlawful acts committed after the taxable event, using concealment or falsification to avoid a tax that is owed. The line between legitimate planning and fraud is the use of fraudulent, simulated, or disguised means, under the standards of Article 116, sole paragraph, of the National Tax Code (Código Tributário Nacional).

Is it possible to have criminal liability extinguished even after a final conviction?

Yes. Article 9 of Law 10.684/2003 and Article 69 of Law 11.941/2009 allow criminal liability to be extinguished by full payment at any stage, even after the conviction has become final and unappealable. The Supreme Federal Court has expressly recognized this possibility, because the legal interest protected is financial in nature and criminal policy is aimed at tax collection. The defense must file a petition with proof of payment in the sentence-enforcement court, asking for a declaration that the sentence is extinguished.

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