(English) The new directions of the Brazilian Court of Auditors (TCU) – tax and social adjustments for paying purposes

[:en]The new directions of the Brazilian Court of Auditors (TCU) – tax and social adjustments for paying purposes

Felipe Alves Pacheco (Lawyer in the Public Law team)

The Brazilian Court of Auditors recently (Decision n° 1.054/2012) suggested guidance for agencies of the Executive, Legislative and Judiciary powers of the country in order to require from the contractors a certificate of debt settlement – CNDT (Negative certificate of debt of work, or positive with negative effect) attached to them, with the tax clearance certificates, as a condition for release of their payment.

Such requirements assume the duty of companies, throughout the execution of the contract, to fit the qualifications and skills required for tenders, as a result of the law of settlement concerning calls for tenders and public contracts (Law n° 8.666/1993).

However, if a tax or social irregularity of the company comes to be seen, the contracting agency could not refuse or suspend payment of the contractor, under penalty to retain an unjust enrichment of the Public Administration, although the service or offer has been made (Decision n° 964/2012).

However, this circumstance can trigger the implementation of administrative disciplinary proceedings. In other term, the Administration may impose penalties provided by law (warnings, fines, temporary suspension of rights to subscribe for tenders and the declaration of incapacity to contract with the Public Administration), a contract performance guarantee for any damage or even the termination of the contract.

Thus, the finding of a tax or social irregularity is not an obstacle to payment of the co-contracting companies; such a situation can cause more harm to businesses if they are subjected to administrative sanctions or if they see their contracts terminated.
Therefore, it is essential to monitor the fiscal and social situation of enterprises in order to avoid disturbances during the execution of the contract concluded with the Administration.

The news given by Chenut Oliveira Santiago is not legal opinions and cannot be considered as such.[:]