As Brazil is a federation, its tax system is divided into different spheres – federal, regional and local. In most cases, the payment of taxes depends on the actions of taxpayers in issuing invoices and completing tax returns, through which the amounts due or the refund of amounts by means of credits and other forms of reimbursement are identified.

The disputes that arise may relate either to tax inspections, which identify flaws in the procedures adopted by taxpayers, or, conversely, to tax credits or fiscal benefits that the authorities reject or delay in granting. It is also common for proceedings to be initiated preventively by taxpayers who seek the courts to set aside assessments considered undue.

Such disputes are frequently conducted through administrative tax litigation before parity-based administrative courts within the structures of the tax authorities, and also through appeals to the ordinary judiciary, since there are no judicial courts specifically dedicated to tax matters in Brazil.

Additionally, in cases involving the commission or suspicion of tax-related crimes, police authorities or the Public Prosecutor’s Office (Ministério Público) may intervene specifically to pursue the criminal liability of those involved. Such investigations are often associated with the non-payment of tax, but the determination of criminal offences is independent of any conviction or acquittal in the civil sphere.

Most tax disputes in Brazil involve federal taxes, most notably the Income Tax on Individuals (IRPF) and on Legal Entities (IRPJ), as well as social contributions levied on gross revenue and payroll (PIS, COFINS and CSLL, among others). At the state and municipal levels, the main taxes are, respectively, the Tax on the Circulation of Goods and Services (ICMS) and the Service Tax (ISS), which account for the majority of the revenue collected by those entities.

The issues underlying tax disputes are diverse and vary according to the economic sector. In general, a large portion of such controversies stems from the complexity of the tax system and from the way in which the tax authorities regulate, interpret and adjudicate tax laws, with frequent changes to rules and procedures that generate uncertainty and legal insecurity for taxpayers.

There are no official statistics regarding tax disputes across the three levels of government. Some estimates suggest that, in the early 2020s, the amounts under administrative and judicial dispute totalled BRL6 trillion, equivalent to approximately 75% of the country’s GDP.

Among the government initiatives aimed at reversing this scenario, the most significant is the approval of a comprehensive reform of consumption taxation, which is still in the process of legislative regulation. The expectation among government authorities is that the new rules will reduce the system’s complexity and simplify tax collection. As the transition phase between the regimes has not yet begun, the effectiveness of the new framework has not been tested. However, an initial increase in tax litigation is expected during the transitional period, during which both regimes are likely to coexist for some time.

The mitigation of tax disputes involves meticulous planning, in which companies may take an active role in structuring their business operations to achieve greater tax security and efficiency. In this effort, it is common to engage legal advisers and tax specialists. The establishment of internal departments or units responsible for tax compliance oversight is also common, with the aim of identifying and correcting errors proactively.

Brazilian legislation provides for the figure of a “special regime”, which consists of a specific tax agreement between the taxpayer and the Public Administration, establishing tailored collection rules for a given company or economic sector. These regimes serve as a mechanism to promote investment or, in some cases, to address gaps in regulation. Although these agreements are widely sought by companies, the coexistence of different regimes increases the overall complexity of the system. Seeking greater simplification and transparency, recent legislative changes have introduced the phasing-out of special regimes, which must be fully eliminated by 2033.

In cases of uncertainty regarding the interpretation of the legislation concerning a particular matter or transaction, companies or representative trade associations may submit formal enquiries to the tax authorities. The responses to such enquiries are binding on the enquirers, but are also mandatory for tax auditors to follow. In this way, the answer to a prior tax enquiry should guide future audit procedures for all taxpayers in identical or sufficiently similar situations.

It is not uncommon in Brazil for taxpayers to disagree with a particular regulation or the position of the tax authorities. In such situations, the use of strategic litigation is common to obtain a preliminary judicial authorisation to either suspend the payment of a tax or secure the maintenance of a tax benefit, when it encounters a specific bureaucratic obstacle.

Where errors in tax payment or compliance with ancillary obligations, such as the completion of tax documents, are identified, the taxpayer may unilaterally acknowledge the error and advance the payment of the tax, thereby avoiding the imposition of penalties. However, once a formal audit procedure has commenced, the confession of errors is no longer permitted. Even so, a co-operative approach with the tax authorities often mitigates the risk of more severe penalties being applied, whether for fraud, collusion or other prohibited practices.

In recent years, Brazil has adopted a series of measures to align itself with Organisation for Economic Co-operation and Development (OECD) standards and recommendations. In this context, in August 2016, the country ratified the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and, in October 2025, formally joined the BEPS Multilateral Instrument (MLI). In the latter case, the agreement must still undergo domestic ratification procedures by the National Congress and the Executive Branch, authorising the country to deposit its instrument of ratification with the OECD so that the agreement may enter into force, amending approximately 26 existing Covered Tax Agreements.

Domestically, national legislation has been undergoing reforms to implement a new transfer pricing framework, most notably through the approval of Law No. 14,596/2023.

In Brazil, the mere non-payment of a tax is considered unlawful under civil law, with economic and administrative consequences that may include the imposition of fines, asset freezes, and restrictions on obtaining tax compliance certificates, which are essential for contract formalisation or access to credit from financial institutions.

As a general rule, liability is limited to the taxpayer (whether an individual or legal entity) that failed to pay the tax. However, it is possible for shareholders, directors or third parties to be held liable, provided that it can be demonstrated that they engaged in acts with specific intent (dolo). In such cases, there may also be criminal repercussions, should tax crimes or other unlawful conduct such as fraud, forgery or simulation be established.

The assessment of additional tax credits by the tax authorities does not require prior payment for the taxpayer to file an administrative challenge. Nevertheless, it is common for tax administrations to offer discounts or favourable payment terms to discourage formal challenges to the assessment. If the taxpayer opts for the administrative route, the enforceability of the credit is suspended by law, preventing the initiation of tax enforcement proceedings or the use of asset attachment measures while the process is ongoing. However, interest and monetary adjustment continue to accrue and will be payable if the assessment is ultimately upheld in the administrative sphere.

As the Brazilian system allows for judicial review of administrative acts, taxpayers may bring the dispute before the courts after the administrative phase has concluded. At this stage, however, suspension of enforceability is not automatic, meaning that to prevent the continuation of tax enforcement proceedings, the taxpayer must provide adequate security (such as a cash deposit, bank guarantee, surety bond or attachment), under the risk of enforcement measures being applied.

Tax audits are often initiated through automated selection, based on electronic cross-checking of information submitted by taxpayers via reporting and compliance systems such as SPED, eSocial or DCTF, among others. Consequently, the submission of returns containing errors or inconsistencies when compared with third-party information (eg, invoices, statements from payers or financial institutions) may trigger an audit procedure. Audits may also arise from unusual behaviour or indicators of higher fiscal risk, such as income levels inconsistent with the taxpayer’s economic capacity. Tax authorities generally apply differentiated treatment to taxpayers with higher turnover or larger volumes of tax credits and offset claims.

In addition, specific monitoring is carried out for sectors historically prone to tax evasion or for major debtors with significant outstanding tax liabilities. Finally, it is common for governments to implement structured audit initiatives through periodic programmes, whereby taxpayers engaged in certain operations or presenting specific characteristics are subject to more detailed audit processes.

A tax audit may be initiated at any time; however, it is subject to a five-year statutory limitation period within which additional tax assessments may be issued. Once this period has elapsed, the taxes are deemed implicitly validated by the tax authority and can no longer be reassessed.

Conversely, following the formal assessment of tax due, a new five-year period begins, during which the tax authority may initiate enforcement proceedings against the taxpayer. This period is suspended in the event of an administrative appeal.

The mere initiation of an audit procedure does not suspend or interrupt the limitation periods for assessment or collection of tax.

Most tax documents in Brazil are electronic, with the system being highly digitalised and focused on real-time tracking of transactions. As a result, in-person tax audits conducted at company premises are rare, as are requirements for taxpayers to attend tax offices to submit documents or provide explanations. In most cases, communication between taxpayers and audit authorities takes place virtually, through dedicated systems managed by the tax administrations.

In-person audits are more common in customs control, with service posts for the inspection and verification of goods and the movement of people and assets. Legislation authorises tax auditors to request confidential information directly from taxpayers or from third parties legally responsible for maintaining and safeguarding records. Data sharing among different supervisory bodies is also permitted, encouraging intergovernmental co-operation, although it is not always consistent. In exceptional circumstances, legislation authorises tax inspectors to enter company premises and, if necessary, to use coercive measures to gain access to warehouses, storage facilities and depots, including with police assistance.

Tax audits may be directed towards a specific purpose (eg, limited to a particular tax or transaction) or may be general in nature, covering different activities, documents and returns within a predetermined period.

The scope and duration of the audit procedure are generally set out in a formal notice, which initiates the audit process and notifies the taxpayer to provide explanations or supplementary documentation. The type of tax and the audit strategy vary according to the level of government and the objectives of the tax administration at the time.

For certain companies and sectors, different audits may carry varying degrees of significance. However, the taxes and issues most frequently subject to audit are:

• IRPJ/CSLL/PIS/COFINS: The main federal taxes on income and turnover, with audits focusing on improper credits, non-deductible expenses or undeclared income.
• ICMS: The principal state tax on the sale and circulation of goods, with audits addressing tax incentives, credits, intercompany transactions and interstate operations.
• ISS: The municipal tax on services, often resulting in disputes concerning withholdings, service classification and determination of the place of taxation.

Formal errors may constitute minor infractions, particularly when the tax has been paid. In such cases, assessments tend to be lower and penalties lighter. However, certain reporting obligations are essential; failure to submit declarations or record transactions may result in severe assessments, regardless of tax evasion.

International co-operation for the exchange of information and mutual assistance between tax authorities has become an increasing trend in response to the globalisation of the financial system. In this context, international efforts have been a determining factor in enhancing tax administrations’ ability to identify assets and taxable income located outside their jurisdictions.

Brazil has been active in this field, adapting its domestic regulations to implement the Standard for Automatic Exchange of Financial Account Information in Tax Matters (AEOI Standard), developed by the OECD. Under these standards, introduced in the country in 2018, international co-operation has progressed, as suggested by data from the Peer Review of the Automatic Exchange of Financial Account Information (2024 Update), published by the Global Forum on Transparency and Exchange of Information for Tax Purposes.

The effectiveness of these partnerships, however, is not guaranteed. Although the same report indicates that Brazil requires further improvements, no public data has been released by the Federal Revenue Service (RFB) in this regard. The expectation, nonetheless, is that over time more concrete information will become available for evaluation.

Co-operative responses that respect deadlines and address the tax authorities’ requests can reduce the chances of additional assessments or the imposition of aggravated penalties. Although taxpayers may decide what information to provide during an audit, obstructing the auditors’ work may be considered an infringement subject to severe sanctions, as may any conduct aimed at avoiding tax payment (such as the alteration, concealment or destruction of relevant documents).

Companies with greater vulnerability or higher volumes of transactions should rely on specialised professionals capable of preparing appropriate documentation and providing explanations regarding relevant matters. It is advisable to have the assistance of lawyers and professionals with legal expertise to ensure compliance with formalities and legal requirements.

In Brazil, tax authorities are not required to issue a preliminary draft of an assessment before the final report. Information is protected by tax confidentiality and is disclosed to the taxpayer only at the end of the procedure. Therefore, there is no pre-assessment defence stage, meaning that the taxpayer’s statements are limited to responding to enquiries made by the auditors during the course of the procedure. Further clarifications, as well as the substantive defence, may be presented only in a potential litigation phase following the audit, through the formal submission of arguments and supporting documents within the applicable legal deadlines.

The administrative challenge phase is optional, and there is no rule requiring the taxpayer to exhaust administrative remedies before seeking judicial review.

Upon being notified of an additional assessment, the taxpayer is generally granted a period of 30 days to file a defence or make payment. The defence is submitted to a collegiate body within the same tax administration responsible for issuing the assessment. Although the adjudicators are tax auditors, the auditor that issued the assessment does not take part in the decision-making process.

At this stage, the taxpayer may challenge the merits of the assessment, the penalties imposed or the procedural formalities. The defence may include documents, technical evidence, or a request for supplementary audits. If authorised, the case proceeds to a special investigative diligence phase, during which additional documents and explanations may be presented.

If unsuccessful, the administrative decision may be appealed to a higher instance. The appellate bodies are composed on a parity basis, including representatives from both the tax administration and the taxpayers.

During the administrative process, the enforceability of the tax claim is suspended. Once a final administrative decision is issued, enforceability is reinstated; however, the taxpayer may still bring the matter before the judiciary, where suspension of enforcement is exceptional or subject to the provision of an appropriate guarantee.

There is no specific deadline for the tax administration to decide on administrative challenges. Although local legislation may establish its own time limits, in practice this rarely occurs, and there are no consequences for the tax authorities in the event of delay.

As there is no rule providing for implied rejection, the taxpayer cannot assume that the challenge has been automatically accepted or denied, nor may they pursue an administrative or judicial appeal in relation to an assessment that has not yet been decided. If the taxpayer brings a judicial action before the administrative process is concluded, this is deemed an implicit withdrawal from the administrative proceedings, and the assessment is automatically confirmed.

The situation differs in administrative requests for tax compensation, tax refund or the granting of tax benefits, which do not constitute litigation but administrative procedures. In such cases, the law establishes a maximum period of 365 days for completion of the request, and case law allows judicial action to ensure timely resolution.

Tax litigation begins with the filing of an initial petition before a first-instance court. Currently, judicial proceedings in Brazil are predominantly digital, meaning that access to the courts takes place through the electronic systems of the judiciary.

Proceedings may be initiated either by the Office of the Attorney General of the National Treasury, which is responsible for representing the interests of the Public Administration at the various levels of government, or by the taxpayer, represented by legal counsel.

In most cases, litigation initiated by the Attorney General’s Office consists of tax enforcement proceedings aimed at collecting outstanding tax debts. Conversely, taxpayers may initiate proceedings through an ordinary lawsuit (declaratory action and/or annulment action), or by means of a writ of mandamus (mandado de segurança), seeking to cancel a tax assessment or to prevent its enforcement before the debt becomes due.

In ordinary proceedings, which are initiated by the taxpayer, the first stage of the tax litigation process is called the cognition phase. At this stage, the taxpayer files a claim, after which the tax authority submits a defence, which is then responded to by the taxpayer through a reply (réplica). Any evidence intended to be presented must accompany the initial petition or be requested during the course of the proceedings. The judge may authorise the assistance of a technical expert to respond to questions from the parties. After this phase of evidence, a judgment will be issued (first-instance decision).

Following this judgment, if there are omissions, contradictions or obscurities, a party may file embargos de declaração (motions for clarification), resulting in an integrative judgment. If the decision is unfavourable to the tax authority, the judgment may be subject to a review known as a remessa de ofício (official submission for review), or the tax authority may file an appeal (recurso de apelação). If the decision is unfavourable to the taxpayer, no remessa de ofício is applicable, and only an appeal may be filed. Appeals are adjudicated by a collegiate body.

Following the appellate decision (acórdão, a decision by a collegiate panel), embargos de declaração may again be filed in cases of omission, obscurity or contradiction. If a party disagrees with the appellate decision, they may further file a special appeal (recurso especial) or an extraordinary appeal (recurso extraordinário), which are submitted to the Superior Court of Justice (STJ) if the matter concerns federal law, or to the Supreme Federal Court (STF) if the dispute concerns constitutional issues.

After the cognition phase is concluded, the execution phase follows. In this phase, if there has been an overpayment or incorrect payment, the taxpayer may choose to recover the undue amount either through a judicial payment order (precatório) or via administrative offset.

In the case of a writ of mandamus, the procedure is similar, but it is not possible to produce evidence during the proceedings; the taxpayer must submit all supporting evidence in advance. It is also not possible to recover an undue payment through a judicial payment order.

Finally, regarding tax enforcement proceedings, the appropriate defence to challenge the debt is called embargos à execução fiscal (objections to tax enforcement). This defence may only be submitted after the taxpayer has fully secured the debt that is under dispute in the enforcement proceedings. If, at the conclusion of the embargos à execução fiscal, the debt is upheld, the security will be converted in favour of the public entity to allow the debt to be settled.

In the case of a writ of mandamus, evidence is a fundamental requirement for filing the action. This is because it is not possible to bring this action without pre-established evidence. Moreover, in a writ of mandamus, the parties are prohibited from requesting the production of additional evidence.

In ordinary proceedings, evidence is of critical importance to demonstrate the invalidity of the tax assessment and to persuade the judge who will adjudicate the case.

Finally, in the context of tax enforcement proceedings, evidence is less significant, as the Certificate of Tax Debt (Certidão de Dívida Ativa), which serves as the enforceable instrument under dispute in the judicial action, carries a presumption of accuracy and liquidity, and it is up to the taxpayer to challenge it.

The burden of proof always rests with the taxpayer. As noted in 4.3 Relevance of Evidence in Judicial Tax Litigation, in the case of enforcement proceedings, the enforceable instrument supporting the collection process carries a presumption of accuracy and liquidity. In ordinary proceedings, the taxpayer must also provide evidence of their entitlement in order to have the tax assessment recognised as undue.

Strategies vary in the field of tax law. Generally, the taxpayer has two options for initiating proceedings. The first is to file a writ of mandamus, an action that does not involve an award of legal costs, which allows the taxpayer to bring a case even if case law is not favourable. On the other hand, if the taxpayer chooses to initiate an ordinary proceeding, although there is a risk of paying the opposing party’s costs, this route allows the taxpayer to produce evidence aimed at challenging the tax assessment.

Furthermore, strategy is also relevant with respect to which party initiates the action to contest the debt. As noted in 4.2 Procedure for Judicial Tax Litigation, in order to file embargos à execução fiscal, the taxpayer must fully secure the debt. If the taxpayer has sufficient resources to contest the debt, they have the option to file either an ordinary proceeding or embargos à execução fiscal. If they do not have the resources, it is preferable to take the initiative and file an ordinary proceeding, in which securing the debt is not required.

Jurisprudence is of fundamental importance in the development of tax litigation, as many actions involving tax collection, through legal theses, ultimately become the subject of discussion in the country’s higher courts via binding precedents. In the tax field, these precedents are referred to as repetitive appeals (recursos repetitivos) in the STJ and general repercussion (repercussão geral) in the STF. In this way, both the STJ and the STF may take positions that are either favourable or unfavourable to the taxpayer, which will impact the outcome of the case, since the Civil Procedure Code provides that decisions established by these courts have binding authority for all members of the judiciary.

Appeals are available when a party receives an adverse decision. Among them are:

• interlocutory appeal (agravo de instrumento);
• motions for clarification (embargos de declaração);
• internal appeal (agravo interno);
• appeal (recurso de apelação);
• special appeal (recurso especial);
• extraordinary appeal (recurso extraordinário);
• appeal against a special appeal (agravo em recurso especial); and
• appeal against an extraordinary appeal (agravo em recurso extraordinário).

An interlocutory appeal is usually filed against a decision that denies a preliminary injunction (in a writ of mandamus) or an anticipatory relief (ação ordinária). It is also applicable against a decision that grants a constraining measure against the taxpayer.

An appeal is filed against a first-instance judgment in any of the proceedings mentioned above. When an appeal is filed, the judge of the court may issue a single-judge decision in cases of established jurisprudence. An internal appeal may be filed against such single-judge decisions.

Following the appellate decision), both a motion for clarification – in cases of omission, contradiction or obscurity – and a special appeal – against arguments involving violations of federal law – or an extraordinary appeal – against arguments involving violations of the Federal Constitution – may be filed.

If the higher-level appeals are not admitted, an appeal against a special appeal and an appeal against an extraordinary appeal may be filed.

At first instance, the decision is made by a judge of law, with the judge being a state magistrate in the case of municipal and state taxes. In the case of federal taxes, the decision falls within the competence of a federal judge.

At second instance, the decision is made by a desembargador (appellate judge), member of a court. This court will be a state court for state and municipal debts, or a federal regional court if the dispute involves federal debts.

Against the decision of the courts, a special appeal and an extraordinary appeal may be filed, and the Ministers of the STJ and the STF will analyse the appeals filed, respectively.

The Brazilian legal system has traditionally prioritised administrative and judicial channels for resolving tax disputes, but there is a growing movement towards the incorporation of alternative dispute resolution (ADR) mechanisms. Although tax arbitration is not widely adopted, some progress has been made, particularly in the context of tax settlements (transação tributária).

Law No. 13,988/2020, which regulates settlements in federal tax litigation, represents the instrument closest to an ADR model in Brazil, allowing taxpayers and the National Treasury to negotiate payment terms and reductions of charges. In parallel, initiatives by the Office of the Attorney General of the National Treasury and the Federal Revenue Service indicate a trend towards expanding consensual methods, although these do not have the typical characteristics of private mediation or arbitration.

Currently, the main alternative route for resolving tax disputes is the tax settlement, conducted by the Office of the Attorney General of the National Treasury. The procedure may take place individually or by adhesion, depending on the profile of the debt and the taxpayer. The settlement proposal may originate from the taxpayer or the National Treasury itself and is evaluated according to criteria of recoverability of the credit and public interest.

The process is administrative, carried out electronically, and concludes with the signing of the settlement agreement, which terminates the dispute and replaces any pending judicial actions or administrative defences. There is no participation of independent mediators or arbitrators, but the negotiation logic is similar.

The tax settlement allows for the reduction of interest, fines and legal charges, as well as flexibility in payment terms and conditions. The law authorises discounts of up to 65% on the total amount of such charges, limited to 70% of the consolidated debt, which may be paid in up to 120 instalments. These reductions are subject to the taxpayer’s ability to pay and to the classification of the debt by the Office of the Attorney General of the National Treasury.

However, a reduction in the principal amount of the tax itself is not permitted, as the Federal Constitution prohibits tax waivers beyond the limits established by law.

The Brazilian legal framework provides for formal consultation mechanisms with the tax authorities, as regulated by Normative Instruction RFB No. 2,058/2021, which grant binding effect to the taxpayer who submits the query.

While the consultation is pending a response, the taxpayer cannot be subject to assessment on the matter under consultation, thereby ensuring legal certainty.

In addition, the Federal Revenue Service has been expanding the use of divergence rulings (soluções de divergência) and Cosit private rulings (soluções de consulta Cosit), which aim to standardise internal interpretations. Nevertheless, the slow pace of responses and their often restrictive nature limit their effectiveness as a broad instrument for dispute prevention.

As Brazil has not yet formally adopted tax arbitration, the existing mechanisms – such as tax settlement – are administrative in nature and follow their own procedural rules.

In practice, these instruments present certain limitations. Eligible disputes are generally restricted to tax credits already registered as outstanding debt (dívida ativa) or under administrative or judicial review.

The value of the cases may vary according to the public notices issued by the Office of the Attorney General of the National Treasury, with no statutory limit established. The evaluation of settlement proposals is conducted internally by the National Treasury and must consider the taxpayer’s economic capacity and the public interest, with no statutory deadline for a decision.

The term of settlement (termo de transação) is final and not subject to appeal, which underscores its administrative nature. As no neutral third parties are involved, there are no mediators or arbitrators, and decisions are based solely on legality, without the possibility of judgment according to equity (ex aequo et bono).

Brazilian transfer pricing rules, recently aligned with OECD standards under Law No. 14,596/2023, have not yet incorporated arbitration or mediation mechanisms for specific disputes. The resolution of transfer pricing controversies generally takes place within administrative litigation before the Administrative Council of Tax Appeals (Conselho Administrativo de Recursos Fiscais – CARF).

However, Brazil’s adherence to the BEPS 2.0 project and its commitment to implementing advance pricing agreements (APAs) indicate a future trend towards the adoption of instruments more akin to ADR. At present, there is no provision for mediation or arbitration in cases involving the indirect determination of taxes, as tax authorities rely on statutory presumptions and official calculation methods.

The additional assessment of taxes is usually accompanied by the imposition of a fine, except in cases of voluntary disclosure by the taxpayer prior to the commencement of a tax audit. The penalty may be set at a fixed amount or calculated as a percentage of the unpaid tax (which may reach up to 100%) or of the transaction value (in cases of formal infractions). The criteria for calculating the fine vary according to the severity of the offence, for instance, where fraud, collusion or simulation is established.

Once the tax assessment is issued, if there is no payment or administrative defence with suspensive effect, the taxpayer may be included in public debtor registries maintained by the Public Administration. In such cases, the taxpayer is prevented from obtaining certificates of tax compliance, which are required for the granting of tax benefits, the execution of private contracts or the securing of credit from financial institutions.

As mere non-payment of tax does not, by itself, constitute a criminal offence, criminal repercussions depend on evidence of intent and materiality of tax crimes as defined by law. In such cases, a specific administrative procedure is initiated which, upon conclusion, may result in the Public Prosecutor’s Office filing formal criminal charges, thereby instituting criminal proceedings.

Criminal liability in Brazil is independent from the civil or administrative liability of the individual. However, the determination of the existence and amount of the tax due is essential for the characterisation of a substantive tax offence. Accordingly, criminal proceedings may only commence once the tax liability has been definitively established, following the conclusion of the administrative phase of the tax dispute. Furthermore, if the tax assessment is cancelled or the tax debt is settled, criminal liability is extinguished.

The characterisation of a tax offence is not automatic and depends on the conduct of a specific investigative procedure led by the police authorities, aimed at verifying whether a criminal act has indeed occurred. Once the investigation is concluded and evidence of authorship and materiality is established, the Public Prosecutor’s Office may file a formal criminal complaint, thereby initiating criminal proceedings.

The administrative tax procedure comprises two levels of review within the tax administration and concludes either with the extinction of the tax assessment or with the definitive establishment of the tax liability. Criminal proceedings are independent and distinct from the administrative tax litigation phase. Accordingly, if the police authorities and the Public Prosecutor’s Office determine that there is sufficient evidence of authorship and materiality of the offence, a formal criminal complaint will be filed before a first-instance court of general jurisdiction, as there are no specialised criminal tax courts in Brazil. The imposition of any penalty depends on the conduct of a full trial in accordance with the rules of criminal procedure, ensuring the accused’s rights to due process, adversarial proceedings and the possibility of appealing to the higher courts.

It is common for the tax legislation of different federative entities in Brazil to provide for the reduction of fines in cases of early payment of the tax. The conditions for such reductions and the amount of the discount vary according to the jurisdiction and timing, with some tax authorities offering more favourable terms to non-recurrent debtors or in cases involving less serious infractions. More serious conduct, such as fraud, simulation or collusion, as well as other tax crimes, is not eligible for discounts or reductions in penalties.

The payment of the tax constitutes a ground for extinguishing criminal liability for tax offences. Therefore, once payment is made, including the applicable fines and interest, the criminal proceedings are automatically rendered moot. In cases where the taxpayer enters into a tax settlement, acknowledging the debt in exchange for more favourable payment terms, the criminal proceedings are suspended and may be reactivated in the event of non-compliance with the agreement.

Decisions may be challenged by filing an appeal with the competent Court of Justice or Federal Regional Court, depending on the tax involved. It is also possible to appeal to the higher courts (STJ and STF) when significant procedural or constitutional issues are at stake, although access to these instances is limited.

In Brazil, disputes involving anti-avoidance rules – particularly transfer pricing, tax planning and undue credits – are primarily treated as civil and administrative infractions. Criminal prosecution is exceptional and depends on the demonstration of specific intent (dolo específico), which must be investigated by the police authorities. In practice, once the administrative tax proceedings conclude, taxpayers generally seek to pay or settle the tax due before the criminal process reaches its conclusion, so cases in which the Public Prosecutor’s Office actually files charges or that result in a conviction are rare.

Situations of international double taxation in Brazil are generally addressed through administrative or judicial proceedings before the tax authorities. They may also be handled through the mutual agreement procedure (MAP). In practice, it is more common for taxpayers to resort to administrative or judicial litigation within the country, as the MAP is still little used and lacks established rules and deadlines.

Last year, Ordinance RFB No. 401, dated 10 April 2024, was published, regulating the MAP within the Federal Revenue Service.

Brazil acceded in 2022 to the MLI under the OECD’s BEPS project. However, the instrument has not yet produced significant practical effects, as the process of internalising and adapting bilateral treaties is still at an early stage. The country is also not a signatory to the European directives on the resolution of tax disputes.

The application of general or specific anti-avoidance provisions in cross-border situations is possible in Brazil, although some questions remain regarding their compatibility with international treaties.

The anti-avoidance clause under Article 116 of the Brazilian Tax Code allows the tax administration to disregard simulated acts or transactions, but its practical application in the context of bilateral treaties is limited.

With the incorporation of the Principal Purpose Test (PPT) through the MLI, it is expected that the Federal Revenue Service will adopt a stricter approach in identifying artificial structures designed to obtain undue treaty benefits. To date, there are no established precedents regarding the application of the PPT in Brazil.

Disputes involving transfer pricing adjustments are resolved within the administrative litigation system, before the Federal Revenue Service and the CARF. It is important to note that Brazil is not a participant in the Multilateral Convention on Transfer Pricing Adjustments and therefore does not use international arbitration.

Judicial disputes generally arise when the taxpayer disagrees with the methodology applied or the tax base considered. Following the reform of the transfer pricing legislation under Law No. 14,596/2023, aligned with OECD standards, the Federal Revenue Service expects a gradual reduction in disputes, particularly after the implementation of APAs and new interpretative guidelines.

APAs represent a recent instrument in Brazil and have gained importance as a means of preventing disputes in the field of transfer pricing.

From 2024, the Federal Revenue Service began the formal regulation of unilateral APAs (Normative Instruction RFB No. 2,198, dated 27 May 2024), with plans to expand to bilateral models, particularly with countries that have double taxation treaties with Brazil.

The APA process begins with a request from the taxpayer, accompanied by the submission of information regarding the transactions and the proposed transfer pricing methods. The Federal Revenue Service reviews the case, may request adjustments, and subsequently negotiates and signs the agreement, which is valid for a specified period. Compliance is monitored through periodic reviews.

Cross-border situations that generate the most disputes in Brazil primarily involve withholding taxes, transfer pricing, profits attributed to permanent establishments, and the interpretation of double taxation treaties.

Issues related to the tax residence of high net worth individuals and the distribution of profits from foreign subsidiaries (CFC rules) have also become increasingly frequent.

The Federal Revenue Service expects that Brazil’s greater alignment with OECD practices and the modernisation of its international rules will gradually contribute to a reduction in these disputes.

This is not applicable in Brazil.

This is not applicable in Brazil.

This is not applicable in Brazil.

This is not applicable in Brazil.

Brazil has not adopted the mandatory and binding arbitration provided for in Part VI of the MLI. Furthermore, the Brazilian model for double taxation treaties has historically not included arbitration clauses, prioritising administrative co-operation and the MAP.

In other words, the country maintains a conservative approach, preferring to preserve state control over the interpretation and application of its tax rules.

As Brazil does not include arbitration clauses in its treaties and has not implemented arbitration through the MLI, there is no practical delineation of the matters that could be submitted to arbitration proceedings.

In its treaty policy, the country prioritises the resolution of disputes through bilateral administrative channels, limited to disagreements over the interpretation and application of treaties, rather than over facts or amounts.

Brazil has not adopted any model of international arbitration, whether in the form of “baseball arbitration” or through an independent advisory procedure.

This position reflects a fiscal policy aimed at preserving national decision-making authority, particularly on matters involving revenue collection and the interpretation of public law norms.

The absence of arbitration clauses in Brazilian treaties, along with the non-adoption of Part VI of the MLI, confirms that the country prefers intergovernmental negotiation (via the MAP) as the primary instrument for resolving international disputes.

Brazil is not a member state of the European Union and therefore is not subject to the European Union Directive on Tax Arbitration. However, its accession to the MLI and the increasing dialogue with the OECD and the UN demonstrate a gradual openness to co-operative mechanisms.

Although tax arbitration is not yet part of the Brazilian framework, there is a discernible trend towards greater engagement, particularly in light of efforts to align with international best practices.

To date, no concrete case of international tax arbitration has been initiated or concluded involving Brazil.

The country has not yet implemented the most recent mechanisms provided for in international or European instruments for dispute resolution. Cross-border tax disputes continue to be addressed through domestic administrative and judicial proceedings or, to a lesser extent, through MAP processes, which are gradually being structured by the Federal Revenue Service and the Office of the Attorney General of the National Treasury.

Brazil is expected to adopt the measures of the BEPS 2.0 project, particularly Pillars One and Two, which focus on the taxation of the digital economy and the establishment of a global minimum tax rate of 15%.

The country actively participates in discussions within the OECD and G20, but has not yet internally implemented the legal certainty and dispute resolution mechanisms provided under these pillars.

If adopted, these mechanisms could contribute to greater predictability and a reduction in international disputes, provided they are accompanied by adaptations to Brazil’s administrative and regulatory framework.

As Brazil does not apply international tax arbitration, there are no published decisions or specific rules on confidentiality in this context.

In general, treaties and multilateral instruments provide that information exchanged between tax administrations is protected under tax secrecy rules in accordance with national legislation. Accordingly, any decision obtained through co-operative procedures or the MAP would, in principle, be confidential and restricted to the parties involved.

The instruments most commonly used in Brazil to resolve international tax disputes are bilateral double taxation treaties, still in their traditional form, without the arbitration modifications introduced by the MLI.

In addition, the MAP has gained importance, particularly for multinational companies.

On the other hand, the absence of arbitration clauses and the lack of applicable European mechanisms make domestic administrative and judicial litigation the main route for resolving cross-border tax disputes. This preference stems both from historical reasons and from the Brazilian legal culture of preserving tax sovereignty.

As Brazil has not yet participated in cases of international tax arbitration, there is no practice for specialised professionals in this context.

Brazilian tax lawyers typically represent taxpayers in MAP proceedings, international tax rulings, and domestic administrative and judicial proceedings, but not in formal international arbitrations.

In most cases, there are no fees for litigation within the administrative process. For example, before the CARF, the body responsible for reviewing federal-level disputes, there are no costs or fees for taxpayers to submit a defence or file appeals. The same applies at the state level in São Paulo, before the Tax and Fees Court, where no fees are required to initiate proceedings.

Unlike administrative proceedings, judicial processes involve court fees for filing a lawsuit. For actions brought by taxpayers, it is necessary to pay initial filing fees, as well as charges for service of process, submission of powers of attorney, and other procedural requirements. The initial fees are calculated based on the value attributed to the claim, which is usually linked to the amount of the disputed tax debt.

If appeals are filed, such as interlocutory appeals, appeals, special appeals and extraordinary appeals, the taxpayer must pay a fee known as the “preparo”. Some appeals are exempt from this fee, including motions for clarification (embargos de declaração), internal appeals, appeals against special appeals  and appeals against extraordinary appeals. These amounts are refundable by the Public Treasury if the taxpayer prevails in the judicial dispute.

The Public Treasury is exempt from court fees.

Finally, in the event of an adverse outcome, the losing party is generally liable for attorneys’ fees, usually calculated as a percentage of the claim or disputed tax debt, ranging from 10% to 20%. An exception to this rule applies to writ of mandamus proceedings, in which the award of attorneys’ fees is not permitted.

Reimbursement is applicable in cases where the taxpayer has advanced court fees or judicial charges, as well as in situations where they have borne the cost of expert fees. Such reimbursement is only granted if the outcome of the case is favourable to the taxpayer.

In the tax context, the only alternative dispute resolution mechanism is through a tax settlement. A settlement conducted directly with the Public Treasury does not involve any fees.

In turn, when there is a judicial action and the parties report that a settlement has been reached, it is possible to reduce court fees by half or even waive the award of attorneys’ fees.

Administrative

According to the latest report published by the CARF, 18,000 cases were adjudicated in 2024, totalling BRL800 billion. This represents a 21% reduction in the backlog, which fell from 92,000 to 72,000 pending cases. The remaining value involved in this backlog amounts to BRL946 billion.

The CARF expects to accelerate case processing in the coming years through the use of new technological tools, such as the implementation of an artificial intelligence system (Artificial Intelligence in Administrative Appeals – IARA) and a virtual plenary, which will allow remote and asynchronous hearings.

Judicial

The Justice in Numbers 2024 report, published by the National Justice Council (CNJ), indicates that 31% of all pending cases in the Brazilian judiciary are tax enforcement proceedings. The average duration of completed enforcement cases was seven years and nine months, which corresponds to three times the average procedural duration in the country.

Of the cases still pending, 86% are in state courts and 14% in the Federal Judiciary. Although not conclusive, this data suggests that collection actions initiated by regional and local governments have accumulated in the judiciary more than federal tax assessments.

As a measure to reduce this backlog, the CNJ issued Resolution No. 547/2024, which authorises the dismissal of cases that have been inactive for over a year and involve amounts under BRL10,000. The regulation also provides for the adoption of pre-litigation conciliation practices for new claims.

There are no public data on the effectiveness of these measures. However, in our experience, none of these initiatives have become commonplace.

There is no published data available.

The 2024–2025 Annual Tax Audit Report of the Federal Revenue Service indicates that, of the additional tax assessments issued in recent years, a significant number remained pending adjudication at the end of 2024. Compliance with these assessments has been high, whether through voluntary payment or due to the relatively low number of cases decided in favour of taxpayers at the administrative stage. The published data shows the following scenario:

• 2022 – 54,379 cases / 10,989 paid (20.2%) / 5,155 under review (9.5%) / 7,766 cancelled (14.3%)
• 2023 – 49,158 cases / 8,613 paid (17.5%) / 5,514 under review (11.2%) / 669 cancelled (1.4%)
• 2024 – 59,588 cases / 5,867 paid (9.8%) / 4,878 under review (8.2%) / 306 cancelled (0.5%)

The Brazilian tax system is rigid, with a detailed delineation of powers and responsibilities established in the Federal Constitution. It features a fragmentation of competences among different federative entities, which poses ongoing challenges for investors and demands constant attention. Currently, the country is undergoing a significant reform of consumption and income taxation, aimed at simplifying the system and increasing its efficiency. However, the transition to the new regime is still at an early stage, and for approximately a decade both systems will coexist, which heightens uncertainty and compromises legal certainty. In the case of income taxes, planned changes include adjustments to dividend taxation and certain other payments.

To ensure success, it is essential that taxpayers and investors adopt clear and well-structured strategies from the outset, in order to mitigate risks and prevent future losses. Several guidelines are particularly relevant:

Governance and Planning

Before disputes arise, a company should review its operations and identify opportunities for tax and financial efficiency, always ensuring compliance with the law and the economic substance of transactions. It is equally important to guarantee compliance with ancillary obligations and maintain up-to-date internal controls.

A robust tax governance system requires effective control mechanisms, supported by specialised legal advice capable of guiding strategic decisions and monitoring legislative and jurisprudential developments – in both the administrative and judicial spheres. This preventive approach is generally more efficient and less costly than merely reacting to assessments that have already been issued.

Strategic Litigation

In highly sensitive matters, it is crucial that the company clearly defines its risk appetite and rationally chooses between administrative and judicial avenues. In certain cases, a proactive stance may be appropriate, including preventive judicial measures to secure predictability in business decisions on contentious matters.

Once litigation is under way, the priority should be to delimit risks and potential losses, structuring consistent and technically substantiated defences. In more complex cases, a tax settlement may represent a pragmatic alternative capable of resolving costly disputes, restoring fiscal compliance and enabling business continuity.

Financial Management and Provisions

Efficient tax management also requires attention to the financial dimension of litigation. It is essential to establish realistic accounting provisions, consistent with the company’s risk profile and liquidity needs. Advance planning prevents surprises and mitigates the impact of potential judgments or judicial guarantees, thereby preserving the company’s economic balance.

Conclusion

Beyond merely reacting to audits and assessments, the modern taxpayer must operate strategically, integrating governance, compliance, risk management and legal analysis. The Brazilian tax landscape is dynamic and challenging, but companies that anticipate its developments, with planning, coherence and transparency, are more likely to turn uncertainty into a competitive advantage.