STJ Defines Mandatory Timing for Accounting Write-Off and Reinforces Risk of Exclusion from Installment Programs

The 1st Panel of the Brazilian Superior Court of Justice (STJ) has consolidated its understanding regarding the use of tax loss carryforwards and negative CSLL tax bases in debt installment and settlement programs.

The Court established that the accounting write-off of the credits used must take place at the exact moment the taxpayer joins the installment program.

According to the Court’s interpretation, even when the taxpayer acts in good faith, the formal write-off of tax losses and the negative CSLL tax base in the tax records constitutes an essential ancillary obligation. This requirement is considered indispensable to streamline and ensure the proper verification of tax information and amounts by the tax authorities.

Failure to record the write-off at the exact time of enrollment in the program may result in serious consequences for the company, including summary exclusion from the installment or settlement program, loss of benefits and of the ability to use the credits, and the resumption of full debt collection.

In light of this decision, we emphasize the importance of promptly recording the write-off of tax loss carryforwards and negative CSLL tax bases used in debt installment and settlement programs simultaneously with enrollment in such programs, in order to mitigate tax risks and ensure the proper enjoyment of the related benefits.