Brazil restricts judicial recovery for habitual tax debtors

The Brazilian Supreme Federal Court has established new restrictions regarding judicial recovery for habitual tax debtors. Under Complementary Law 225 of 2026, companies that use the non-payment of taxes as a deliberate business strategy are barred from accessing judicial recovery processes.

To be classified as a habitual debtor, a company must meet three specific criteria: an irregular debt of at least R$ 15 million that exceeds its total declared assets; a pattern of repeated delays lasting four consecutive months or six alternating months within a single year; and a lack of objective justification for the non-payment, such as public calamity or consecutive years of loss.

This regulation aims to prevent companies from using insolvency protections to bypass tax obligations. According to the National Treasury Attorney General's Office, the rule is expected to affect approximately 0.08% of debtors registered in active debt. Companies flagged under these criteria are entitled to notification and a hearing before the classification is finalized.