Supreme Court establishes criteria for fines imposed on companies that distribute profits while owing taxes

The Brazilian Supreme Court (STF) has established criteria for imposing fines on companies that distribute bonuses or profit-sharing payments while they have outstanding tax debts.

Under the ruling in ADI 5161, the penalty may only be imposed in the following cases:

• when, cumulatively, the tax liability has been definitively established and recorded as an outstanding debt owed to the Federal Government;
• its enforceability is not suspended under the circumstances set forth in Article 151 of the National Tax Code (CTN); and
• the debt is not secured in the manner provided for in Article 9 of the Tax Enforcement Law.

It is worth noting that the decision also precludes the imposition of a fine based solely on accounting records of contributions that have not yet been paid.

How DPC can support your company

Domingues e Pinho Contadores provides guidance to its clients on tax implications, including the criteria applicable to profit distribution. Contact us at: dpc@dpc.com.br.