Brazil implements tax self-regularization to reduce litigation

The Brazilian tax system is seeing a shift toward preventive measures to reduce litigation through taxpayer self-regularization. Under Article 138 of the National Tax Code (CTN), the concept of 'spontaneous denunciation' allows taxpayers to avoid penalties by confessing infractions and paying due taxes and interest before any formal tax audit or administrative proceeding begins.

Complementary Law No. 236/2026 introduces new provisions to Article 194 of the CTN, requiring tax administrations to prioritize preventive methods. This allows taxpayers to correct errors or inconsistencies in accessory obligations before an official notice of violation (auto de infração) is issued. This mechanism aims to resolve discrepancies—such as material errors or interpretive differences—before they escalate into long-term administrative or judicial disputes.