Ruling challenges overreach of tax authority and reaffirms taxpayer rights in economic hardship
In a notable decision, Brazil’s Federal Regional Court for the 5th Region (TRF5) granted emergency relief to a private education company that had been barred from entering a new tax settlement (transação fiscal) due to a two-year restriction imposed by Brazil’s National Treasury Attorney’s Office (PGFN). The restriction, outlined in Article 18 of PGFN Ordinance No. 6,757/2022, prohibits re-entry into settlement programs for two years following the termination of a prior agreement — even if the new request involves different debts.
Background: Denial Based on Internal Regulation
The company had previously participated in a tax settlement program but defaulted on payments, leading to termination in July 2024. When attempting to join a new program under PGDAU Notice No. 6/2024, it was denied based on PGFN’s ordinance. After an initial denial of relief at the trial level, the company appealed, arguing that the restriction lacks legal basis and exceeds the regulatory authority of the PGFN.
The Court’s Reasoning: Legal Limits and Economic Reality
Federal Judge Francisco Alves dos Santos Júnior sided with the taxpayer. He held that only legislation — particularly complementary tax law — may restrict a taxpayer’s right to enter a new settlement program. Administrative rules from lower-level officials cannot override constitutional principles such as:
- Legality,
- Proportionality,
- Reasonableness.
The judge criticized the measure as bureaucratic and counterproductive, particularly in a fragile economic environment where businesses are struggling and the government seeks to increase revenue.
“Such deadlines cannot be delegated to a third-tier authority,” the judge wrote. “This kind of restriction unjustly penalizes companies already in difficulty — the very ones tax settlements are designed to help.”
Practical Effect: Access Restored, Debt Suspended
The ruling orders PGFN to allow the company’s enrollment in the current settlement program and suspends the enforceability of the related tax debts during the process. It also requires issuance of a tax clearance certificate, ensuring the company remains compliant and operational.
Broader Implications: Bureaucracy vs. Economic Recovery
This case sets an important precedent by challenging the rigidity of non-legislative administrative norms that conflict with taxpayer protections. It also reframes tax settlements as tools for economic recovery, not punitive measures. The court highlighted the company’s educational purpose, reinforcing the decision’s social impact — particularly given that educational institutions may, in many cases, be entitled to tax immunity.