According to the Brazilian law, some conducts may be considered as fraud that prevents a company or individual from paying taxes, which constitute tax evasion crimes, as set forth in Law n. 8,137, dated 27 December 1990:
Article 1. It is considered a crime to reduce or evade the payment of any kind of tax, social contribution or accessory obligation, through the following acts:
- to omit information or falsely declare it to tax authorities;
- to defraud the tax auditing by including inexact elements or omitting transactions of any nature in any tax document required by legislation;
- to falsify tax invoice, invoice, sale note or any other document related to a taxable operation;
- to draft, distribute, supply, issue or make use of document that is known to be false or inaccurate;
- to deny or not supply, when it is mandatory, tax invoice or any other equivalent document in relation to the sale of merchandise or rendering of service, effectively performed, or supply such documents not in accordance with legislation in force.
Penalty – Imprisonment, from two to five years, and a fine.
Article 2. It also constitutes crime of the same nature:
- to falsely state or to omit declaration on income, goods or facts, or to make use of any other fraud in order to avoid, totally or partially, the payment of taxes;
- do not collect, within the legal period, tax amount or social contribution, discounted or collected, as a passive subject of obligation and that should be collected to the public treasury;
- to demand, pay or receive, for oneself or for the beneficiary taxpayer, any consideration on the deductible portion or tax incentive or contribution;
- do not apply, or applying in disagreement with the law, tax incentive or tax instalments released by a development agency or entity;
- to use or disclose a data processing program that allows the passive subject of the tax obligation to have tax information different from that which is, by law, provided to the public treasury.
Penalty – Imprisonment, from six months to two years, and a fine.
Brazilian public officers have the obligation to report to law enforcement agencies facts that they become aware when performing their duties that, besides constitute a civil or administrative violation, can also characterize a criminal offense. More specifically, if tax agents identify a situation that potentially involves not only an administrative tax violation, but also a criminal wrongdoing, such agents must report the facts to the Public Prosecution Office through a document called Representação Fiscal para Fins Penais – RFFP (Tax Report for Criminal Purposes).
It is important to stress that, according to the Bidding Precedent n. 24, issued by the Brazilian Federal Supreme Court, Brazilian tax authorities can only issue a RFFP reporting facts that may characterize tax crimes, after a final decision is reached in the administrative sphere and the company is able to present all its defenses. However, if the tax agent identifies other potential crimes – such as fraud, misrepresentation, money laundering, criminal conspiracy – such facts can be immediately reported to the Public Prosecution Office.
In Brazil, tax evasion crimes are not related with the amount of the tax that was not paid, but rather with the reduction or suppression of the amount of the tax due with fraud or misappropriation, as mentioned in item 1.
Yes, tax evasion crimes will only be characterized when the individual acts with willful intent.
According to the Brazilian Law, if the total amount of the tax due is paid, both the tax case and the criminal case will be closed. Also, if the total amount of the tax is paid in instalments, the criminal case will be suspended until the conclusion of the payment, when the criminal case will be closed.
As a general rule, in Brazil, investigations on crimes are conducted by the Police. After the conclusion of the investigation, the Chief of Police drafts a report with the main findings and submit it to the Public Prosecutor. If the Public Prosecutor understands that there is evidence about the occurrence of the wrongdoing and proof to connect the individuals potentially liable, the Public Prosecutor must press charges against such individuals.
In Brazil, the initial term for the statute of limitation period applicable to the tax offences may change according to the nature of the tax crime.
In the so-called materials crimes (article 1 of Federal Law n. 8,137/1990) – where an effective damage to the public treasury must occur – the statute of limitation period starts, according to the Bidding Precedent n. 24, of the Brazilian Federal Supreme Court, when a final decision is reached in the administrative sphere by the tax authorities. On the other hand, in the formal crimes (article 2 of Federal Law n. 8,137/1990) – where no actual damage must be proved – the statute of limitation period starts at the moment when the criminal conduct (action or omission) is executed.
The statute of limitations for crimes described in article 1 of the Law n. 8,137/1990 is 12 years; for crimes described in article 2 of the Law n. 8,137/1990, four years.
Please refer to the answer for question 7.
The penalties, pursuant to the articles 1 and 2 of the Law nº 8,137/1990, are, respectively, imprisonment, from two to five years, and a fine, and imprisonment, from six months to two years, and a fine. Usually, these penalties are replaced by alternative penalties, such as the loss of goods or values, community services, and temporary restriction of rights.
No, considering that, in Brazil, corporate criminal liability only exists in case of environmental crimes. However, a compliance or risk mitigation program can be used to show that C-suite level was not involved in decisions that resulted in tax evasion and that top management adopted the necessary measures to try to avoid the occurrence of wrongdoings in the company.
Yes, self-disclosure programs exist in Brazil. As a general rule, when the taxpayer performs a self-disclosure and pays the tax due before any tax procedure by the tax authorities, the taxpayer is exempted from the payment of penalties provided for in the legislation. However, there are formal procedures to be adopted and if they are not observed, the self-disclosure may be jeopardized.
Please refer to the answer for question 5.
No, in Brazil it is the opposite situation: a pending discussion on the administrative sphere has an impact on the statute of limitation period on the criminal sphere.
Yes, they can.
Yes. It is possible to settle an agreement similar to a non-prosecution agreement.
As a general rule, only individuals can be held criminally liable under Brazilian Law, meaning that in the vast majority of cases, non-natural persons, such as corporations or other legal entities, cannot be charged with crimes. The only exception to this general rule is the criminal liability imposed on legal entities for environmental crimes.
Yes, Brazilian Criminal Law applies indistinctly to all individuals (nationals or foreigners) in case there is enough evidence that indicates their involvement or direct participation in the wrongdoing.
Criminal and administrative liabilities are independent. As a result, the Company will not be liable for any penalty imposed to the individuals as a result of a criminal conviction, including fines.
Yes. In the last years, some Brazilian States established task forces with Public Prosecutors and Tax Agents to cooperate on investigations, exchange information and pursue criminal prosecutions against individuals connected with companies with large tax debts.