Tax Installment Programs: REFIS and Compliance Programs

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 installment programs, such as REFIS (Brazil’s Tax Recovery Program) and state and municipal initiatives, offer special terms for paying off tax debts, including discounts on penalties and interest.

What Tax Installment Programs Are

Tax installment programs are initiatives by Brazil’s levels of government (the federal government, the states and the municipalities) that let taxpayers settle overdue tax debts on special terms. These terms typically include significant discounts on penalties, interest and statutory charges, along with longer payment periods. They are fiscal policy tools: they help the government recover revenue while giving taxpayers a way out of default.

The best known of these programs is REFIS (Tax Recovery Program), created by Law No. 9.964/2000. Since then, the federal government has launched several similar programs, including PAES (Special Installment Program, Law No. 10.684/2003), PAEX (Exceptional Installment Program, Provisional Measure No. 303/2006), the Crisis REFIS (Law No. 11.941/2009) and, more recently, PERT (Special Tax Compliance Program, Law No. 13.496/2017). Each program has its own rules on discounts, number of installments and eligibility requirements.

Besides the federal programs, states and municipalities also launch their own tax compliance programs from time to time. In São Paulo, the PEP (Special Installment Program) for ICMS (the state tax on the circulation of goods and services) debts comes up repeatedly. In Minas Gerais, the “Regularize” program offers special terms for ICMS and IPVA (the state vehicle ownership tax). Municipalities often open installment programs for IPTU (the municipal urban property tax) and ISS (the municipal services tax), especially at the start of each fiscal year.

Typical Terms of Installment Programs

The terms of installment programs vary by level of government and by edition of the program, but they follow a common structure. Programs generally offer several enrollment options, with discounts that depend on how you pay: a lump-sum payment with the largest discount (which can reach 100% of penalties and interest), a short installment plan with an intermediate discount, and a long installment plan with a smaller discount.

PERT (Law No. 13.496/2017), the most recent major federal program, offered, for example, discounts of up to 90% on interest, 70% on penalties and 100% on statutory charges for lump-sum payment of debts registered in the active debt roll (dívida ativa, the official registry of overdue tax debts). For installment plans of up to 145 months, the discounts were 80% on interest and 50% on penalties. These terms meant substantial savings for the taxpayers who enrolled.

Tax installment programs are initiatives by Brazil’s levels of government (the federal government, the states and the municipalities) that let taxpayers settle overdue tax debts on special terms.

Enrolling in an installment program means making an irrevocable and irreversible acknowledgment of the debts included, which means you recognize that the debt exists and accept its amount. This has important procedural consequences: if you were contesting the debt in court, enrolling in the program means dropping the lawsuit and waiving the right on which it is based. For this reason, you should weigh the decision to enroll carefully, with the help of a tax attorney.

Tax Settlement: The New Negotiation Option

Tax settlement (transação tributária), regulated by Law No. 13.988/2020, introduced a new way to negotiate tax debts at the federal level. Unlike a traditional installment plan, a settlement allows more tailored negotiation that takes into account your ability to pay and the particulars of your case.

A settlement can include discounts on penalties, interest and statutory charges; installment plans of up to 120 months (or 145 months for individuals, microenterprises (ME) and small businesses (EPP)); deferral or a moratorium; and substitution of collateral. The maximum discount is 65% of the total amount of the debt (or 70% for individuals, ME and EPP), with the reduction capped at 50% of the principal.

There are three types of settlement: settlement by enrollment (you accept a public notice issued by the PGFN, the Office of the Attorney General for the National Treasury, or by the RFB, Brazil’s Federal Revenue Service, on predefined terms), individual settlement (for debts above R$ 10 million, negotiated case by case) and settlement initiated by a taxpayer’s proposal. The PGFN has regularly published notices with attractive terms, especially for taxpayers in judicial reorganization or with debts that are hard to collect.

Precautions and Risks of Enrolling in an Installment Plan

Enrolling in an installment program requires a careful review of its terms and conditions. You should check whether the debts to be included are actually owed, because acknowledging a debt means admitting that it is due. If you have solid legal grounds to challenge the collection, it may be more advantageous to keep fighting the debt in court than to enroll in an installment plan with a discount.

If you fail to meet the conditions of the plan (for example, by paying an installment late), you will be removed from the program and the entire remaining balance will be collected, without the discounts granted. Amounts you have already paid are credited against the original debt, but penalties and interest are again calculated in full. Removal can also lead to immediate registration of the debt in the active debt roll and the filing of a tax enforcement action.

Another important precaution concerns the duty to stay in good standing with the tax authorities while the plan is in effect. Many programs require that you not accumulate new tax debts while you are paying the installments. Failing to meet this condition can be grounds for removal. Having professional support throughout the entire installment period is the best way to avoid problems.

Frequently Asked Questions

Can I enroll in an installment program if a tax enforcement action is already pending against me?

Yes. Most installment programs allow you to include debts that are already registered in the active debt roll and in the tax enforcement phase. Enrolling suspends the tax enforcement action and the enforceability of the tax debt for as long as the plan remains in effect. However, any collateral already provided in the case (such as attachments of property or court deposits) is normally kept in place until the installment plan is paid in full.

Does a tax installment plan affect my ability to obtain a tax clearance certificate?

As long as your plan is in good standing (installments paid on time), you are entitled to a Positive Certificate with Effects of Negative (CPEN), which for practical purposes is equivalent to a clearance certificate. This certificate allows you to take part in public bidding, obtain financing and carry out other acts that require tax compliance. Late installments suspend issuance of the CPEN until you bring the plan current.

Is there a permanent ordinary installment plan outside the special programs?

Yes. Regardless of the special programs, you can request an ordinary installment plan for federal tax debts of up to 60 months under Law No. 10.522/2002. This plan does not offer discounts on penalties and interest, but it does allow you to regularize your tax situation. States and municipalities also have ordinary installment plans, with terms set by their own legislation.

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