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Averages should not ignore the Contumacious Debtor Law, experts say
Media should not ignore the Contumacious Debtor Law, experts say
Risks are greater for companies that fail to comply with balance sheet obligations and are unaware of the situation of related parties
By Suzana Liskauskas, Para o Valor — Rio de Janeiro
Instituted by Complementary Law nº 225/26, known as the Taxpayer Defense Code and in force since the beginning of the year, the concept of “contumacious debtor” has generated doubts in the business environment. A recurring question is about the profile of a company that can be classified as a persistent debtor and in what situations this occurs. Another question concerns the impacts on medium-sized companies.
The persistent debtor loses the right to tax benefits, cannot participate in tenders or request judicial recovery. With the regulation of the law at the end of March, the Union has already begun to notify eligible companies, with debts worth billions. This profile may give the impression that only larger companies are the tax authorities' focus, but tax law experts emphasize that medium-sized businesses should not ignore the issue.
"The government's first move suggests that the initial focus appears to be on larger companies and in sectors historically sensitive to structural default. In April, the Federal Revenue and PGFN notified 13 companies in the cigarette sector that could be classified as persistent debtors, with debts that, combined, exceed R$25 billion. Based on the announced value, it is easy to see that we are talking about liabilities that are much higher than the common reality of an average company. But this does not mean that average companies can simply ignore the topic”, says Daniel Biagini, from Bergamini Advogados.
According to art. 11 of Complementary Law 225/2026, a taxpayer who has tax behavior characterized by “substantial”, “repeated” and “unjustified” default is considered a persistent debtor. This means that the classification is not the result of a specific delay in paying taxes or a situation of financial difficulty duly proven by a company.
Djalma Rodrigues, partner in the tax area at Miguel Neto Advogados, says that, at the federal level, substantial default is synonymous with an irregular situation of tax credits, whether or not registered in active debt, with a value equal to or greater than R$15 million and which are, at the same time, greater than the value of the company's total and known assets. Rodrigues notes that, in addition to the debt, the company must be in default for at least four consecutive calculation periods or six, alternating within twelve months, in addition to not presenting any justifications for not having made the payment.
For Marcos Correia Piqueira Maia, partner at the law firm Maneira Advogados, the definition in law that allows identifying the “contumacious debtor” not only serves the interest of the Tax Authorities, it also intends to benefit taxpayers who act regularly, fulfilling tax obligations and need to compete with those who offer more advantageous prices and conditions for not paying taxes. “The ambition is legitimate, but, naturally, the question that arises is whether the aforementioned legislation, when applied in practice, will be able to maintain this clear boundary (between the eventual defaulter and the persistent debtor) or whether it will end up capturing taxpayers who are simply going through a moment of financial stress”, he says.
When analyzing the risk framework for medium-sized companies, Biagini says that the starting point needs to be the substantial default criterion. This topic must be prioritized, because, in the lawyer's opinion, in theory, any company can present repeated and unjustified default. Although it is not a common situation for medium-sized companies, their inclusion in the concept of persistent debtor is not impossible, he emphasizes.
Biagini highlights that the requirement brought by the Law for the debt to be 100% greater than the taxpayer's known assets shows the logic of the rule. “The problem is not just the existence of high debt in absolute terms, but the existence of debt that apparently exceeds the company's equity capacity. In other words, the law tries to identify situations in which the tax liability is greater than the known capacity to pay”, he details.
Attention to framing
Complementary Law No. 225/2026, sanctioned on January 9 and regulated at the end of March, brought general rules for federal debts. Leo Lopes, Tax Litigation partner and Tax Partner at FAS Advogados, says that these rules will also apply to States and Municipalities that do not have their own legislation.
Biagini draws attention to an issue in Complementary Law 225/2026, which allows States, the Federal District and municipalities to establish, in their own legislation, values different from those foreseen for the Union. “Although the federal rule is R$ 15 million, nothing prevents state or municipal tax authorities from adopting lower parameters. If this happens, medium-sized companies could be much more exposed, especially in taxes such as ICMS and ISS”, he highlights.
Djalma Rodrigues says that the persistent debtor regime was designed to achieve situations of structural tax default. Therefore, it does not target companies that face a specific cash flow problem or are in a legitimate discussion about a certain debt.
“For this reason, as a rule, medium-sized companies are not the natural target for classification as persistent debtors. The minimum threshold of R$15 million and the requirement that the debt exceeds 100% of known equity act as relevant filters to distinguish strategic default from ordinary financial difficulty. Still, there are risks that deserve attention”, he assesses.
In Rodrigues' assessment, a sensitive point is the ancillary obligations. The lawyer says that the known assets are determined based on the information contained in the Tax Accounting Bookkeeping (ECF) or the Digital Accounting Bookkeeping (ECD). When the company required to deliver these records fails to comply with this procedure, the known equity will be considered equal to zero.
This situation, according to Rodrigues, can make irregular debts above R$ 15 million automatically greater than the percentage of 100% of the company's known assets. “Errors or delays in accounting information can also distort this relationship and unduly increase the company’s exposure”, says the lawyer.
To mitigate this risk, it is essential to keep balance sheet information up to date, with regular sending of the ECF and ECD. Rodrigues also recommends monitoring the proportion between tax liabilities and assets, appropriately formalizing administrative and judicial discussions, keeping liability suspended, when applicable; and strictly comply with installments, transactions or other forms of regularization.
“The regulations themselves provide for the deduction of credits in installments or transactions with installments paid on time, as well as credits suspended by court decision or registered in active debt with suspended enforceability”, states Rodrigues.
Challenges in family holding companies
Another point of attention covers the related parts of the company. Marcos Maia notes that art. 4th of Complementary Law 225/2026 extends the understanding to “related parties” (as defined in Law No. 14,596/23).
“A regular debtor is also considered to be someone with recognized tax liability — administratively or judicially — who is a related party of a legal entity deregistered or declared unfit in the last five years, as long as their tax credits in an irregular situation total a value equal to or greater than R$ 15 million”, highlights Maia.
In practice, the result impacts family holdings, integrated economic groups and companies with common partners. Maia notes that these are frequent structures in the medium-sized segment in Brazil, and these companies can be penalized depending on the qualifications of a single member of the group, emphasizes Maia.
Victor Tavares de Castro, partner at Ayres Westin Advogados, specialist in tax law, says that companies' focus should focus on regulatory criteria. For Castro, this is even more sensitive in situations involving high liabilities, broken installments or relevant tax discussions.
"One of the most sensitive points is the possibility of debts still being discussed administratively influencing this classification. This generates debate because the regular exercise of the right to defense should not be treated as an indication of abusive behavior", he assesses.
The way to reduce risks, in Castro's view, is to reinforce tax governance. Companies must keep ancillary obligations up to date, closely monitor tax liabilities and demonstrate concrete measures of regularization and good faith, he says.
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Averages should not ignore the Contumacious Debtor Law, experts say
May 11, 2026Media should not ignore the Contumacious Debtor Law, experts say Risks are greater for companies that fail to comply with balance sheet obligations and are unaware of the situation of related parties By Suzana Liskauskas, Para o Valor — Rio de Janeiro Instituted...
