Tax Reform: House of Representatives approves base text regulating PLP 108/2024

On August 13, 2024, the House of Representatives approved the base text regulating  Supplementary Bill No. 108/2024, the second bill originally submitted by the Executive Branch to regulate a few topics regarding the Tax Reform.

This supplementary bill aims to regulate the implementation and structuring of the Steering Committee, administrative litigation, the distribution of revenue, as well as the provisions relating to the ICMS-IBS transition.

In addition, Supplementary Bill No. 108/2024 provides for amendments to the National Tax Code and further details the ITCMD, ITBI, and COSIP levy.

Among the key changes to the original draft, we briefly highlight the following:

• Optional advance payment of the ITBI upon executing the Real Estate Ownership Transfer (public deed or private document), with the option of applying a lower rate than that levied at the time of registering the real estate property;
• Levy of the ITCMD on disproportionate dividend distribution in the event of a corporate act carried out on a liberal basis and without a business justification that can be proven;
• Levy of the ITCMD on private pension plans, such as the Free Benefit Generator Plan (“PGBL”) and the Free Benefit Generator Life Plan (“VGBL”) – the latter only applies if the amount is held for less than five years;
• Guaranteed taxpayer participation at the court of final appeals (Superior Chamber) for the judgment of administrative demands involving the IBS; and
• The Committee for Harmonization of Tax Administrations will standardize the IBS and the CBS – as requested by the chairman of the IBS Steering Committee, the highest authority in the Ministry of Finance, or the entities representing the taxpayers’ economic categories.

After the highlights proposed by the House of Representatives are duly approved and analyzed, the bill will move forward to the Senate’s scrutiny – which will hold a single round of voting – and, subsequently, will seek the president’s sanction or veto.

Demarest’s Tax team is available to provide any further clarifications that may be necessary.