Suspension of the statute of limitations or forfeiture of tax credits in administrative proceedings.

Although our National Tax Code has recently completed half a century of validity, an interesting topic continues to be the subject of intense disputes and inquiries between taxpayers and the tax authorities, notably the occurrence of prescription or forfeiture of tax credits submitted to questioning in the administrative sphere.

As is generally known, forfeiture consists of the loss of the Public Treasury’s right to carry out the legal act of assessment, that is, it is the lapse of the right due to its non-exercise during the period of time conferred by law, of 5 (five) years in national law, as prescribed in the heading of article 173 of the CTN.

A caveat must be made regarding the terminology of the CTN, since the legal text refers to the loss of the right to assess, when we know that the administration does not have the right to assess, but rather the duty to do so.

Article 173 of the Brazilian Tax Code (CTN) indicates three initial moments for calculating the statute of limitations: i) the first day of the fiscal year following the one in which the assessment could have been made; ii) the date on which the decision that annulled, due to a formal defect, the previously made assessment becomes final; and in the sole paragraph, iii) the date on which the formalization of the tax credit was initiated by notifying the taxpayer of any preparatory measure indispensable to the assessment.

It is also important to mention the rule of the statute of limitations for the right to assess in cases of taxes subject to self-assessment where there is partial payment of the tax due, with the five-year period starting from “the occurrence of the taxable event,” according to paragraph 4 of article 150 of the CTN.

Another aspect we should highlight is that, in reality, with the exception of cases of “assessment by homologation,” referred to by some legal scholars as “taxes without assessment” (when the taxpayer himself must declare the taxable event and make the payment of the amount due), the statute of limitations ends up being extended by the Brazilian Tax Code (CTN).

It will either be on the first day of the fiscal year following the one in which the assessment could have been made, or from the date on which the decision that annulled, due to a formal defect, the previously made assessment becomes final.

In these cases, the statute of limitations is not counted from the date of the taxable event (the specific generating event), which exposes a subtle difference between this legal concept and private law.

Another difference in relation to private law lies in the fact that the statute of limitations, in the case of article 173, item II, of the CTN (“date on which the decision that annulled, due to a formal defect, the previously made assessment becomes final”), causes the statute of limitations to be interrupted.

Regardless, the expiration of the statute of limitations extinguishes the subjective right of the active subject, terminating the tax obligation, as provided for in Article 156, item V of the Brazilian Tax Code (CTN).

Once the assessment has been issued by the holder of the tax credit, as per Article 174 of the CTN, the administration has a period of 5 (five) years to initiate the “action for collection of the tax credit” (tax enforcement), under penalty of prescription.

However, we must recognize that the limitation period, in truth, begins from the moment the tax authorities are able to take legal action to exercise their right of action.

This is because, often, even after the assessment has been issued, the taxpayer files objections or appeals in the administrative sphere that prevent the Public Treasury from initiating tax enforcement proceedings.

Furthermore, the sole paragraph of article 174 of the Brazilian Tax Code (CTN) indicates the causes for the interruption of the statute of limitations, causing the counting of the period to cease, starting again in its entirety.

In this respect, it is good to remember that the suspension of the statute of limitations is a phenomenon that should not be confused with interruption, because, while in the latter the five-year statute of limitations begins again, in the suspension it is resumed considering the time already elapsed.

In any case, once prescription is established and the consequent loss of the right to collection action occurs, the creditor loses the legal means to collect their credit, which empties the previously established obligation of its legal validity.

As can be seen from the summaries of the judgments cited below, the majority understanding of our Courts points to the effective suspension of the counting of the limitation and prescription periods, while the discussion of a given tax demand continues in the administrative sphere.

Regarding the statute of limitations, it is important to highlight that any notification or initiation of tax proceedings before the first day of the fiscal year following the one in which the assessment could have been made has the effect of bringing forward the starting point for calculating said period.

Furthermore, in the case of taxes subject to self-assessment, where no payment has been made by the taxpayer, the five-year statute of limitations begins to run from the first day of the fiscal year following the one in which the assessment could have been made, even if a confession, installment payment, or even a declaration of debt is subsequently issued, as decided by the Superior Court of Justice (STJ) in a representative appeal.

Regarding prescription, current jurisprudence points to the suspension of its course in cases where the controversy has been initiated in the administrative sphere, including following the express provision of article 151, item III of the CTN (Brazilian Tax Code).

It should also be noted that the time period for the configuration of the so-called intercurrent prescription continues in cases where the collection process (tax enforcement) remains inactive for the time necessary for its configuration, even in cases where its suspension has been granted based on article 40 of Law 6.830/80.

Fernando Brandão Whitaker – DE VIVO, WHITAKER E CASTRO ADVOGADOS

Published in the AASP Bulletin No. 3050 – 2nd half of November 2017, p.12