What is the relevant legislation relating to tax administration and controversies? Other than legislation, are there other binding rules for taxpayers and the tax authority?
The Brazilian tax system is established by the Federal Constitution, which describes, in a very detailed manner, all collectable types of tax and the related federative entities entitled to collect it. In Brazil, the Federal Constitution affords a very detailed treatment to tax issues, determining the general aspects of taxable events and limits on the imposition of taxes.
The Brazilian tax code (Law No. 5,172/1996) establishes general tax rules (concerning aspects such as the definition of taxes, obligations, assessment, tax credits and the statute of limitations). In addition, each type of tax may be outlined in specific laws, which consist in a statute responsible for instituting taxes and governing all their aspects.
The tax system is guided by the strict legality principle, meaning that no other rule may contravene legal provisions settled in law. Furthermore, as the Brazilian Constitution provides for tax issues in details, such constitutional provisions must be strictly observed.
Competent authorities enact statutes (such as decrees, normative rulings, resolutions and ordinances) that, in theory, only serve the purpose of detailing and providing more practical rules related to what has been established in the constitution and in the pertinent laws. However, it is not unusual that such statutes end up creating rights and obligations not provided for in any laws or in the Federal Constitution, thereby exceeding their purpose and contributing to a litigation scenario in tax matters.
In addition, it is possible that other rules may arise in a more specific and practical manner, such as:
- once the taxpayer requests the government to issue an opinion on the correct interpretation of a certain rule regarding a particular case, it becomes obliged to act in accordance with the government’s reply; and
- once higher courts rule in a certain case, its ruling binds other members of the judiciary branch (this is a consequence of rulings in repetitive and general repercussion appeals).
International treaties signed by Brazil are incorporated in the domestic legal system by means of decrees. Once they become rules enforceable by the legal authorities, taxpayers must also comply with them.
As for litigation tax matters, there are different levels of discussion: administrative and judicial. Such matters will be discussed under the terms of the procedure rules provided in Brazil by the Brazilian Code of Civil Procedure. The Code of Civil Procedure currently in force was enacted in 2015 (Law No. 13,105/2015), as a result of a reform in the Brazilian procedural system, which expressly consists in the general law governing all procedures before administrative and judicial courts. In spite of this, special laws are enacted in order to rule on specific procedures that may take place at the administrative and judicial levels of litigation. The Brazilian Code of Civil Procedure should be applied in a subsidiary and supplementary manner.
Tax foreclosures lawsuits are governed by a specific law (Law No. 6,830/1980) and the procedure at the federal administrative level is governed by Decree No. 70,235/1972 and by Law No. 9,784/1999).
What is the relevant tax authority and how is it organised?
Each federative entity (federal government, states and municipalities) has its own legislative structure for the purposes of administering and collecting taxes.