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.

In 2026, a comprehensive VAT Tax Reform is currently taking course in Brazil, to unify all VAT taxes (PIS, COFINS, ICMS, ISS and IPI) into a dual IVA (VAT): CBS (federal) and IBS (municipal/state). Tax substitution will gradually occur up until 2032. A Tax Committee (Comite Gestor) is currently being implemented to co-ordinate the legislation related to CBS and IBS collection and also as a court for future CBS/IBS administrative proceedings.

The VAT Tax Reform also set forth an excise tax upon alcohol spirits, sugar-added products, cigars, lotteries, vehicles, vessels and aircrafts. 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.

Since part of the VAT reform legislation was approved in 2025, the Brazilian government initiated, in 2026, implementation of a transitional phase seeking the gradual substitution of PIS, COFINS, ICMS, ISS and IPI for CBS and IBS.

In the 2026 transitional phase, CBS and IBS are not levied but they shall be reported in the existing ancillary obligations. Due to the lack on ruling, such report of CBS and IBS in the pre-existing tax returns is already controversial. As of January 2026, the Federal Government initiated the collection of IRPF on the distribution of dividends, increasing the taxation for “high-worth” individuals. Some controversies arising from dividends accrued up until 2025 – which were considered exempt – have increased tax litigation.

Some of federal tax incentives and federal tax exemptions were partially revoked by the Federal Government in 2026. Some specific tax regimes such as the presumed profit method (Lucro Presumido) were considered tax incentives. Some taxpayers are already litigating the tax rate increase arising therefrom.

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.

Due to the lack of ruling in the recently modified legislation, some taxpayers may be compelled to file preventive tax lawsuits to avoid tax assessments.

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, a Real Estate Unified Registry (Cadastro Imobilário Brasileiro) is currently being implemented to ensure uniformity among the Federal Revenue, Notaries and municipalities.

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 as follows.

• 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.
• ITCMD: State Gift Tax – tax rates were recently increased, and assessment basis is being modified to comprise the assets’ market value. There are ongoing discussions regarding the ITCMD levying over assets, donations and inheritances abroad.
• ISS – the municipal tax on services, often resulting in disputes concerning withholdings, service classification and determination of the place of taxation.
• ITBI – municipal tax levied on transference of real estate ownership; discussions relate to corporate transactions where individuals transfer real estate to holding companies.

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.

In 2026, the Federal Administrative Court (CARF) reduced the administrative deadlines for filing the administrative defences to 20 days and set forth a year-end break, where administrative deadlines in course are stayed from December until mid-January of the following year.

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, 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. 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 motions to clarify, resulting in an integrative judgment. If the decision is unfavourable to the tax authority, the judgment may be subject to a review known as an official submission for review, or the tax authority may file an appeal. If the decision is unfavourable to the taxpayer, an official submission for review is applicable, and only an appeal may be filed. Appeals are adjudicated by a collegiate body.

Following the appellate decision, a decision by a collegiate panel, motion to clarify 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 or an extraordinary appeal, 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 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 (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 opposition to tax execution, 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 not allowed to request 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 causa (motive) 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 an Opposition to Tax Execution, 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 Opposition to Tax Execution. 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 in the STJ and general repercussion 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;
• motions clarify;
• internal appeal;
• appeal;
• special appeal;
• extraordinary appeal;
• appeal against a special appeal; and
• appeal against an extraordinary appeal.

An interlocutory appeal is usually filed against a decision that denies a preliminary injunction (in a writ of mandamus) or an anticipatory relief (ordinary action). 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 to clarify – 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 an 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.

Brazil does not formally recognise tax arbitration, and tax disputes are predominantly resolved through administrative and judicial proceedings. Nonetheless, consensual mechanisms have gained increasing relevance in recent years.

The primary ADR-type instrument is the tax settlement (transação tributária), regulated at federal level by Law No 13,988/2020. This mechanism allows the National Treasury and taxpayers to negotiate payment terms, instalments and reductions of penalties, interest and legal charges in relation to tax credits under administrative or judicial dispute, or already registered as outstanding debt. The procedure is conducted administratively, without the participation of independent mediators or arbitrators.

Although the system does not incorporate private mediation or arbitration in tax matters, recent regulatory developments and policy initiatives indicate a gradual shift towards preventive and consensual approaches within the Brazilian tax controversy framework.

Settlement of tax disputes in Brazil is possible primarily through the tax settlement mechanism (transação tributária), regulated at federal level by Law No 13,988/2020.

Settlements may be entered into either by adhesion to public notices issued by the Office of the Attorney General of the National Treasury (PGFN) or through individual negotiation, depending on the profile and amount of the debt. The proposal may be initiated by the taxpayer or by the tax authorities and is assessed based on criteria such as the recoverability of the credit, the taxpayer’s economic capacity and the public interest.

The procedure is administrative and conducted electronically. Once executed, the settlement agreement terminates the dispute and requires the withdrawal of pending administrative appeals or judicial actions. No independent mediators or arbitrators are involved, and the mechanism remains strictly governed by statutory parameters.

Brazilian law does not permit the reduction of the principal amount of a tax assessment outside the limits expressly authorised by statute. However, under the tax settlement regime established by Law No 13,988/2020, reductions may be granted in relation to penalties, interest and legal charges.

Discounts are subject to statutory caps and depend on the classification of the debt and the taxpayer’s ability to pay, as assessed by the Office of the Attorney General of the National Treasury. Payment terms may also be extended, with instalment plans reaching up to 120 months in certain cases.

Accordingly, while the core tax liability cannot generally be waived, the legal framework allows for negotiated reductions of ancillary charges as part of an administrative settlement.

Brazilian law provides for formal consultation procedures that allow taxpayers to request an official interpretation of tax legislation prior to adopting a given position. At federal level, such consultations are regulated by Normative Instruction RFB No 2,058/2021.

A duly submitted consultation, concerning a concrete factual situation, produces binding effects in relation to the requesting taxpayer. While the consultation is pending, the tax authorities may not assess the taxpayer on the matter under review, thereby offering a degree of legal certainty.

In addition, the Federal Revenue Service issues binding rulings (notably Cosit rulings and divergence rulings) aimed at standardising administrative interpretation. Although these mechanisms function as preventive tools, practical limitations include formal requirements and, in some cases, delays in the issuance of responses.

Tax ADR mechanisms in Brazil remain administrative in nature and operate within strict statutory limits. The tax settlement (transação tributária) is generally available for tax credits already under administrative or judicial dispute or registered as outstanding debt. Eligibility, applicable discounts and payment conditions are defined by law and further detailed in regulations and public notices issued by the Office of the Attorney General of the National Treasury.

There is no participation of independent mediators or arbitrators, and settlements must observe principles of legality and public interest. The assessment of proposals is conducted internally by the tax authorities, and the executed settlement agreement is final and binding, requiring the withdrawal of pending appeals or court actions.

The 2023 constitutional tax reform (Constitutional Amendment No 132/2023), which introduces a new VAT-type system (IBS and CBS), is expected to reshape the tax controversy landscape. Although it does not establish tax arbitration, it provides for a more centralised and uniform administrative framework, which may contribute to greater consistency and potentially reduce litigation in the medium term.

Brazil does not provide for arbitration or mediation in transfer pricing disputes. Controversies in this area are resolved through administrative litigation, primarily before the Administrative Council of Tax Appeals (CARF), and subsequently before the judiciary if necessary.

Following the enactment of Law No 14,596/2023, which aligned Brazilian transfer pricing rules with OECD standards, the legal framework now contemplates the implementation of advance pricing agreements (APAs). Although still in the process of regulatory development, APAs are expected to function as preventive instruments aimed at reducing future disputes rather than resolving existing ones. Brazil also participates in mutual agreement procedures (MAP) under applicable double tax treaties, though arbitration clauses are not commonly adopted.

In cases involving the indirect determination of taxes, where the tax authorities apply statutory presumptions or estimation methods, no ADR-specific mechanisms are available. Such assessments are challenged through the ordinary administrative and judicial dispute resolution channels.

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.

Brazil addresses double taxation primarily through its network of double tax treaties (DTTs), which generally follow the OECD and UN Model Conventions, albeit with certain source-based features typical of Brazilian treaty policy.

The principal mechanism for resolving cases of double taxation is the Mutual Agreement Procedure (MAP), available under applicable treaties. Taxpayers may request the competent authority to initiate discussions with the treaty partner where taxation is considered not to be in accordance with the treaty. MAP is administrative and government-to-government in nature, and the taxpayer does not formally participate in negotiations.

Although Brazil has aligned its transfer pricing system with OECD standards under Law No 14,596/2023, arbitration clauses in tax treaties remain uncommon. Consequently, binding arbitration is not typically available, and the effectiveness of dispute resolution depends largely on intergovernmental co-operation within the MAP framework.

Brazil does not have a fully regulated general anti-avoidance rule (GAAR) comparable to those found in some OECD jurisdictions. Although the National Tax Code provides for the possibility of disregarding acts or transactions intended to disguise the occurrence of a taxable event (Article 116, sole paragraph), the lack of specific implementing legislation has led to continued debate regarding its scope and application.

In practice, cross-border structures are more commonly challenged through specific anti-avoidance rules (SAARs), including transfer pricing rules, thin capitalisation rules, controlled foreign corporation (CFC) rules and beneficial ownership requirements under domestic law and tax treaties. These provisions are frequently in cases involving profit shifting, treaty shopping or artificial arrangements.

Following the recent alignment of Brazilian transfer pricing legislation with OECD standards, tax authorities are expected to adopt a more substance-oriented analysis in cross-border matters. Nonetheless, challenges based on alleged abuse or simulation continue to be assessed within the ordinary administrative and judicial dispute framework.

International transfer pricing adjustments may be challenged through the ordinary administrative and judicial dispute resolution channels. At administrative level, cases are reviewed by the Administrative Council of Tax Appeals (CARF), and adverse decisions may subsequently be brought before the federal courts.

With the enactment of Law No 14,596/2023, Brazil aligned its transfer pricing system with the OECD arm’s length principle, replacing the former fixed-margin methodology. This shift is expected to increase the technical complexity of disputes, as adjustments now rely more heavily on comparability analyses, functional characterisation and economic evidence.

Where double taxation arises, taxpayers may seek relief through the Mutual Agreement Procedure (MAP) under applicable tax treaties. However, treaty-based arbitration is generally not available, and the resolution of disputes remains dependent on administrative review and intergovernmental negotiations.

Following the enactment of Law No 14,596/2023, Brazil introduced the legal basis for advance pricing agreements (APAs) as part of the alignment of its transfer pricing system with OECD standards. APAs are designed as preventive instruments, allowing taxpayers and the tax authorities to agree in advance on the transfer pricing methodology applicable to specific cross-border transactions.

The framework contemplates both unilateral and bilateral (or multilateral) APAs, the latter to be negotiated in co-ordination with the competent authorities of treaty partners. Detailed procedural rules are still subject to regulatory development, and the practical implementation of the programme is ongoing.

APAs are not dispute resolution mechanisms in the strict sense, but rather tools aimed at preventing future controversy and mitigating the risk of double taxation, particularly in complex or high-value cross-border arrangements.

Cross-border tax disputes in Brazil are litigated through the same administrative and judicial framework applicable to domestic cases. At administrative level, controversies are reviewed by the Administrative Council of Tax Appeals (CARF), with subsequent judicial review available before the federal courts.

Litigation commonly arises in matters involving transfer pricing adjustments, controlled foreign corporation (CFC) taxation, withholding taxes on cross-border payments, the interpretation of double tax treaties and the application of anti-avoidance rules. Given Brazil’s traditionally source-oriented approach in treaty interpretation, disputes often concern the allocation of taxing rights and the qualification of income.

Where double taxation results from an assessment, parallel recourse to the Mutual Agreement Procedure (MAP) may be pursued under the relevant treaty. However, as treaty-based arbitration is generally not available, cross-border litigation frequently proceeds concurrently with intergovernmental negotiations, and final resolution may depend on judicial outcomes or administrative settlements.

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 Part VI of the Multilateral Instrument (MLI), which provides for mandatory binding arbitration in treaty disputes. Consequently, arbitration is not available under Brazil’s covered tax agreements.

Although Brazil signed the MLI, it opted not to apply the provisions on arbitration. As a result, treaty-related disputes, including cases of double taxation, are addressed exclusively through the MAP, without recourse to binding third-party determination.

Accordingly, international tax arbitration does not currently form part of the Brazilian tax treaty framework, and dispute resolution remains dependent on intergovernmental negotiations between competent authorities.

Tax arbitration is not currently available in Brazil. As the country has not adopted the arbitration provisions contained in Part VI of the Multilateral Instrument (MLI), matters arising under tax treaties cannot be submitted to binding arbitration.

Accordingly, disputes involving cross-border taxation, including those related to transfer pricing adjustments or treaty interpretation, are addressed through the MAP provided in applicable double tax treaties. The procedure is conducted exclusively between the competent authorities of the contracting states and does not involve a third-party arbitral body.

Brazil does not apply baseball arbitration or the independent opinion procedure in international tax disputes. As the country has not adopted the arbitration provisions of Part VI of the Multilateral Instrument (MLI), treaty-related disputes cannot be submitted to any form of binding arbitration.

Consequently, mechanisms such as final offer arbitration (baseball arbitration) or independent expert opinion procedures are not available within Brazil’s tax treaty framework. Disputes involving double taxation or treaty interpretation are addressed exclusively through the MAP between the competent authorities of the contracting states.

The EU Directive on tax dispute resolution mechanisms does not apply in Brazil, as it is limited to member states of the European Union.

Brazil signed the MLI but has not adopted the provisions relating to mandatory binding arbitration. Consequently, Part VI of the MLI does not apply to Brazil’s covered tax agreements.

As a result, disputes arising under Brazilian tax treaties continue to be resolved through the MAP, without recourse to arbitration.

Brazil is not subject to EU legal instruments on tax dispute resolution. In the international context, Brazil participates in the OECD/G20 Inclusive Framework on BEPS and has adopted several measures aimed at aligning its tax system with international standards.

Recent developments include the reform of Brazilian transfer pricing rules through Law No 14,596/2023, which incorporated the arm’s length principle and brought the system closer to OECD guidelines. Despite these changes, international tax disputes are still addressed primarily through domestic administrative and judicial procedures, supplemented where applicable by the MAP under tax treaties.

Brazil participates in the OECD/G20 discussions concerning Pillars One and Two of the BEPS 2.0 project. However, the relevant international rules have not yet been fully implemented into Brazilian domestic legislation.

Consequently, no specific dispute resolution procedures have been introduced in Brazil in relation to Pillars One or Two. Any controversies arising from the application of international tax rules would currently be addressed through the existing administrative and judicial dispute resolution mechanisms or, where applicable, through MAP under tax treaties.

Decisions in Brazilian tax disputes are generally public. Administrative decisions issued by the Administrative Council of Tax Appeals (CARF) are published and made available online, providing access to precedents and interpretative guidance.

Judicial decisions rendered by federal courts are likewise public and accessible through electronic court systems. However, decisions resulting from tax settlements (transação tributária) are typically not publicly disclosed in full, although general information about settlement programmes may be published by the tax authorities.

Tax disputes in Brazil are most commonly resolved through administrative litigation before the CARF or through judicial proceedings before the federal courts.

In recent years, tax settlements (transação tributária), regulated by Law No 13,988/2020, have become an increasingly relevant instrument for resolving disputes, particularly in cases involving outstanding tax debts or ongoing litigation. In cross-border situations, the MAP, under applicable tax treaties, may also be used to address cases of double taxation.

International tax arbitration is not currently available in Brazil, as the country has not adopted treaty-based arbitration mechanisms under the MLI or similar frameworks.

Accordingly, lawyers and tax practitioners are primarily involved in representing taxpayers in administrative proceedings, judicial litigation and treaty-based procedures such as the MAP. Their role typically includes preparing legal and technical submissions, supporting negotiations with the tax authorities and co-ordinating cross-border dispute strategies where multiple jurisdictions are involved.

In most cases, there are no fees for litigation within the administrative process. For example, before the CARF, the Court 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 to clarify, 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 the award of attorneys’ fees.

Administrative

According to the latest report published by the Administrative Council of Tax Appeals (CARF), 19,020 cases were adjudicated in 2025, totalling BRL490 billion. This represents a 23% reduction in the backlog, which fell from 73,000 to 67,000 pending cases. The remaining value involved in this backlog amounted to BRL833 billion in February of 2026.

The Council expects to continue accelerating 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.

Judiciary

The Justice in Numbers 2025 report, published by the National Justice Council (CNJ), indicates that 28.09% of all pending cases in the Brazilian judiciary are tax enforcement proceedings. The average duration of completed enforcement cases was seven years and seven months, which corresponds to three times the average procedural duration in the country.

Of the cases still pending, 84.5% are in state courts and 15.4% 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 is no public data on the effectiveness of these measures. However, in the authors’ experience, none of these initiatives have become commonplace.

There is no published data available concerning such cases.

There is no relevant published data available.

The Brazilian tax system remains complex and highly regulated, with powers and responsibilities distributed among the Federal Government, states and municipalities under the Federal Constitution. This fragmentation continues to generate structural challenges for taxpayers and investors, particularly in sectors with multi-jurisdictional operations.

At the same time, Brazil is undergoing one of the most significant tax transformations in its history. The Tax Reform enacted through Constitutional Amendment No 132/2023 introduced a new model of consumption taxation based on a dual value-added tax system, composed of the Contribution on Goods and Services (CBS) at the federal level and the Tax on Goods and Services (IBS) administered by states and municipalities, in addition to the Selective Tax (IS) on specific products. The reform seeks to simplify the system, reduce cascading taxation and increase neutrality. However, the transition will occur gradually between 2026 and 2033, during which the current taxes (such as PIS, COFINS, ICMS and ISS) will coexist with the new regime. This transitional period is expected to generate interpretative challenges and potential litigation as the new rules are implemented.

In parallel, the federal government has also advanced discussions regarding income taxation reforms, including proposals to introduce or expand the taxation of dividends and to revise corporate income tax structures. Although these measures are still under legislative debate, they may significantly affect corporate tax planning, investment structures and cross-border transactions.

In this evolving environment, taxpayers and investors must adopt clear and structured strategies from the outset in order to mitigate risks and anticipate potential disputes.

Governance and Planning

Before disputes arise, companies should conduct periodic reviews of their operational and tax structures, identifying opportunities for efficiency while ensuring compliance with the law and the economic substance of transactions. This is particularly relevant in light of the tax reform, as companies must prepare for the gradual migration to the CBS/IBS system and reassess supply chains, pricing structures and contractual arrangements.

Ensuring compliance with ancillary obligations and maintaining reliable internal controls are equally important. A robust tax governance system should include monitoring of regulatory developments, jurisprudence and administrative guidance issued during the reform’s implementation.

Effective governance also requires specialised legal and tax advisory support capable of assisting with strategic planning and compliance management. Preventive approaches, including tax risk mapping and internal audits, tend to be significantly more efficient and less costly than responding to tax assessments once disputes have already arisen.

Strategic Litigation

When tax disputes arise, companies must carefully evaluate their litigation strategy, including the choice between administrative and judicial avenues. Brazil offers a sophisticated administrative tax litigation system, particularly through the CARF, which allows taxpayers to challenge assessments before resorting to the judiciary.

In sensitive matters or where legal uncertainty may affect business decisions, preventive judicial measures may be advisable. These measures can provide greater predictability in situations involving controversial interpretations of new tax legislation, particularly in the context of the ongoing tax reform.

Once litigation has commenced, companies should focus on structuring technically consistent defences and delimiting potential financial exposure. In some cases, tax settlements and negotiated resolutions, increasingly encouraged by Brazilian legislation in recent years, may represent pragmatic alternatives capable of reducing litigation costs and restoring fiscal regularity.

Financial Management and Provisions

Tax litigation also requires careful financial management. Companies must adopt realistic accounting provisions that reflect their risk exposure, in accordance with applicable accounting standards and internal risk assessments.

The transition to the new tax regime may also affect the valuation of contingencies and long-term tax exposures. Advance planning helps mitigate the financial impact of potential judgments, guarantees or settlement payments, thereby preserving the company’s liquidity and economic stability.

Conclusion

Tax controversy strategies in Brazil must go beyond reactive responses to audits and assessments. In a context marked by structural reform, regulatory changes and potential new rules on income taxation and dividend distributions, taxpayers must integrate governance, compliance, litigation strategy and financial planning into a coherent approach.

Although the Brazilian tax environment remains complex, companies that anticipate regulatory developments, adapt their structures to the new tax framework and maintain transparent and well-documented practices are better positioned to manage risks and transform uncertainty into a competitive advantage.