Revolutionizing Tax Debt Management: PGFN's Proposed Ordinance on Performance Bonds

The Federal Treasury's Office of the General Counsel (PGFN) has launched a public consultation to gather input on a new ordinance aimed at improving the regulation of performance bonds used to cover tax debts. The proposed changes seek to align the rules with recent regulatory innovations and replace the existing PGFN Ordinance 164/2014. This initiative has garnered significant interest from key players in the insurance sector, including the National Confederation of Insurers (CNseg), the National Federation of General Insurance (FenSeg), and the Superintendence of Private Insurance (SUSEP).

Streamlining Tax Debt Management with Innovative Regulatory Reforms

Standardizing Performance Bond Policies

The proposed ordinance introduces the provision of standard policy models, which are outlined in the draft's annexes. This move aims to enhance and standardize the process of accepting and offering performance bonds, ensuring the security of these financial instruments. By providing a consistent framework, the PGFN seeks to simplify the administrative procedures and promote greater transparency in the tax debt management landscape.

Extending Minimum Validity Period

One of the key changes in the proposed ordinance is the increase in the minimum validity period for performance bonds in tax execution cases. The current regulation requires a minimum of two years, but the new proposal extends this to five years. This extension is designed to provide greater stability and continuity in the management of tax debts, reducing the administrative burden and ensuring the long-term viability of these financial arrangements.

Addressing Co-insurance Arrangements

The draft ordinance introduces a specific provision regarding co-insurance, which aims to clarify the responsibilities and liabilities of multiple insurers involved in a performance bond policy. The new rule stipulates that the policy must explicitly state that there is no joint and several liability, and it must identify the lead insurer and the other insurers involved, along with their respective insured limits. This level of transparency is expected to enhance the understanding and management of co-insurance arrangements in the context of tax debt coverage.

Streamlining Submission Timelines

Another significant change in the proposed ordinance is the modification of the submission timeline for new or renewed performance bond policies. Under the current regulation, policies must be submitted to the PGFN at least 60 days before the end of the validity period. The new proposal eliminates this requirement, allowing for the submission of a new policy or the renewal of an existing one before the end of the validity period. This change is intended to provide more flexibility and reduce the administrative burden for both taxpayers and the PGFN.

Defining Non-payment Loss Characterization

The draft ordinance also introduces a specific provision regarding the characterization of non-payment losses in the context of tax execution. According to the proposal, non-payment losses will be characterized within 15 days of the notification of the final and unappealable decision on the merits. This clear timeline aims to streamline the process and provide greater certainty for all parties involved in the management of tax debts.

Gathering Stakeholder Feedback

The public consultation process initiated by the PGFN is an opportunity for interested parties to provide their input and suggestions on the proposed ordinance. Stakeholders can submit their contributions by September 30, 2024, using the electronic form available on the PGFN portal, following the guidelines outlined in the published notice. The complete documentation related to the public consultation is also available on the PGFN's website, allowing for comprehensive review and engagement.The PGFN's initiative to modernize the regulation of performance bonds in tax debt management demonstrates a commitment to adapting to the evolving needs of the insurance sector and ensuring the efficiency and security of these financial instruments. By incorporating stakeholder feedback and aligning the rules with recent regulatory innovations, the PGFN aims to streamline the process, enhance transparency, and ultimately improve the overall management of tax debts in Brazil.