New legislation to facilitate debt negotiation for companies

Taxpayers will now have more advantageous conditions when signing debt negotiation agreements with the Treasury Department thanks to a law published on Wednesday. The new legislation extends discounts and payment terms for tax transactions, a tool that allows the renegotiation of debts with tax authorities.

The law increases the maximum discount on the total amount of credits to be traded from 50 to 65 percent and increases the maximum number of monthly transaction installments from 84 to 120. 

In addition, the new legislation allows the use of income tax loss carryforwards and the negative tax base of net income contributions (CSLL) to pay debts up to 70 percent of the amount remaining after discounts.

For experts, the change in legislation will be particularly advantageous for companies in financial crisis, in administration, or about to enter administration, as they have a lower rating and more discounts, in addition to the likelihood of accumulated losses.

According to credit protection company Serasa, just over 6 million companies in Brazil were in default in April this year, almost 200,000 more than in the same month last year. Companies are finding themselves “trapped” by high interests and ballooning inflation.

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