The Brazilian Administrative Tax Council (CARF) approved an understanding that companies belonging to the same economic group are jointly liable for social security obligations.
Below we highlight the main points of the decision:
1. CARF Understanding: The summary’s text states that companies that are part of an economic group are jointly liable for fulfilling the obligations provided for in the social security legislation, without the tax authorities needing to demonstrate the common interest mentioned in Article 124, Section I, of the National Tax Code (CTN);
2. Joint liability: Under this new understanding, it is sufficient for the panel that analyzed the case to identify the existence of an economic group for one company to be held responsible for another’s debts;
3. Jurisprudential Divergence: CARF’s interpretation of these obligations diverges from the understanding of the Supreme Federal Court (STF) and contradicts the established case law of the Superior Court of Justice (STJ), which had already established that the mere existence of an economic group is not enough to declare joint and several liability which would only exist when both participate jointly in the situation that constitutes the triggering event, with mere economic interest in such a situation not being sufficient.
The issue of joint liability within economic groups will continue to be a central topic in the courts, requiring caution from companies within such groups. With CARF’s approval of the summary, there is a high likelihood of an increase in the number of lawsuits on the matter, as its application contradicts consolidated understandings in higher courts, such as the STF and STJ.
