Brazil has enacted Complementary Law No. 236 of 4 September 2026, introducing alternative dispute resolution mechanisms, national standards for tax administrative proceedings, capped and reduced penalties, and rules aligning tax administration with binding STF and STJ decisions.
Brazil has published Complementary Law No. 236 of 4 September 2026, amending the National Tax Code (Law No. 5.172 of 1966) to enhance tax collection and limit the application of penalties.
The legislation promotes consensual dispute resolution, establishes national standards for administrative tax proceedings, caps and moderates tax penalties, and aligns tax administration practices with binding court decisions.
Consensual dispute resolution & ADR mechanisms
The reform formally incorporates alternative dispute resolution (ADR) into the National Tax Code, allowing arbitration, mediation, and tax transactions to suspend tax-credit enforceability, with arbitration awards and mediation agreements potentially extinguishing tax credits. It also clarifies that these ADR mechanisms do not constitute revenue waivers under the Fiscal Responsibility Law.
Moderation & caps on tax fines
The law enforces principles of reasonableness and proportionality for tax penalties:
- Maximum penalty caps: The reform introduces maximum caps on fines assessed for tax deficiencies. The standard penalty is capped at 75%, increasing to 100% in cases involving willful fraud, tax evasion, or collusion, and to 150% for repeat offenders.
- Standard payment discounts: The reform also provides standard reductions for taxpayers who settle their liabilities within specified periods. Fines are reduced by 50% for full payment and 40% for instalment agreements made during the administrative appeal period. After the appeal period but before enrollment in active debt, the reductions are 30% for full payment and 20% for instalment agreements.
- Compliance program incentives: Taxpayers enrolled in recognised tax compliance programs receive higher fine reductions: 60% (full payment in appeal period), 50% (instalment in appeal period), 40% (full payment before active debt), and 30% (instalment before active debt). Habitual tax debtors are ineligible for fine reductions.
National rules for the administrative tax process (PAF)
- General procedural rules: Chapter IV establishes uniform rules for tax administrative proceedings across Brazil’s federal, state, Federal District, and municipal authorities. Federative entities with more than 100,000 residents must provide a mandatory two-tier administrative review. Taxpayers may also file administrative appeals without being required to provide a deposit or guarantee.
- Procedural deadlines: Administrative objections, voluntary appeals, and special appeals must generally be filed within 20 business days, while motions for clarification have a five-business-day deadline. All procedural periods are counted in business days, with deadlines suspended from 20 December to 20 January for the annual recess.
- Automatic stay: Cases involving identical legal questions are automatically stayed when the STF or STJ orders a collective suspension for the review of a qualified precedent.
Binding effect of High Court decisions
Binding precedents and settled jurisprudence from the STF and STJ are binding on tax authorities and administrative courts. Within 90 business days after a final ruling, the Public Treasury must issue a legal opinion identifying matters in which it will stop issuing assessments, challenging taxpayer claims, or pursuing pending appeals. Tax authorities are also prohibited from assessing or enrolling tax debts based on issues resolved in taxpayers’ favour by binding STF or STJ decisions.
Audit transparency & preventive measures
Tax audits must be formally notified in advance, detailing the responsible officer, scope, requested records, and expected duration. Police assistance is limited to cases involving a documented risk of physical resistance. Tax authorities must also prioritise preventive measures that allow taxpayers to self-correct before a formal tax deficiency notice is issued.
States, the Federal District, and Municipalities have two years to align local laws with the new rules. If they fail to do so, the CTN provisions apply automatically.
