03/07/2025
In mergers and acquisitions (M&A), tax liabilities of the target company are often a major hurdle to deal closure. However, Brazilian legislation offers a strategic solution to this issue. The tax settlement mechanism (known locally as transação tributária), established by Law No. 13,988/2020 and regulated by PGFN Ordinance No. 6,757/2022, has become increasingly relevant in the context of ongoing tax reform. It enables companies to negotiate outstanding tax debts with reductions in fines and interest, as well as extended payment terms. This tool helps mitigate pre-existing tax risks and promotes greater legal certainty amid evolving tax regulations.
Often, a company’s valuation is compromised by unresolved tax issues, leading buyers to reject the price sought by sellers.
In this context, the tax settlement mechanism emerges as a powerful legal instrument to regularize tax liabilities and enhance the company’s appeal to potential buyers.
As such, assuming a target company’s tax debt — once renegotiated — can become a strategic advantage for the buyer. This allows for acquisitions at more favorable valuations, with liabilities already addressed through settlement.
In jurisdictions such as the United States, the United Kingdom, and Germany, similar mechanisms are commonly used to prepare companies for sale, improving the predictability and safety of M&A transactions. While still nascent in Brazil, this practice is gaining traction as a key factor in deal structuring.
Of note, the Office of the Attorney General of the National Treasury (PGFN) recently issued Public Notice No. 11/2025, open for adherence until September 30, 2025. This notice offers highly advantageous terms, including discounts of up to 100% on interest, fines, and other charges related to tax debts. The program includes tailored settlement options based on the company’s financial profile and debt characteristics:
- Settlement Based on Payment Capacity: Allows for customized terms and discounts to the taxpayer’s actual financial situation — up to 65% under the general rules or up to 70% for individuals, micro-entrepreneurs (MEIs), small businesses, philanthropic hospitals, cooperatives, non-profit organizations, and educational institutions.
- Settlement of Irrecoverable Debts: Offers more favorable conditions, with discounts of up to 65% or 70%, for debts considered difficult to recover.
- Small-Value Debt Settlement: Designed for debts of up to 60 minimum wages, with specific discount brackets and differentiated treatment for MEIs.
- Secured Debt Settlement: Allows for the negotiation of debts backed by guarantees (e.g., surety bonds or letters of guarantee), focusing on flexible payment of the initial installment, though without principal reductions.
The tax settlement mechanism presents a valuable opportunity for companies seeking to resolve federal tax disputes and outstanding debts on more favorable terms.
From a corporate law standpoint, using tax settlement in the context of M&A transactions offers significant benefits but requires careful strategic planning and enhanced due diligence. One of the key challenges lies in timing — identifying the right moment to initiate the settlement process. Ideally, this should align with the M&A deal timeline to avoid legal uncertainty, reduce the need for contractual guarantees, and minimize disputes over holdbacks or indemnity clauses in the purchase agreement.
When properly structured and timed, tax settlements can serve as a competitive differentiator and a strategic enabler in M&A transactions. They allow parties to anticipate and manage tax risks, rebalance negotiations, and increase the perceived value of the target company.
A well-executed tax settlement can not only unlock stalled negotiations but also reduce future litigation, foster trust between parties, and provide greater transactional security.
Our corporate and tax law teams are available to provide clarification and guidance on the subject.
Authored by: Gisleine Porto and Thais Ribeiro Bernardes Casado
