After the Brazilian Federal Revenue Service notified rural producers to regularize lease and partnership contracts that were not in compliance with the legislation, the “Declara agro” operation is now extending its inspection to taxpayers who, between 2020 and 2022, improperly deducted aircraft expenses in the Rural Producer’s Digital Cash Book (LCDPR).
The deduction of these costs had been used by rural producers based on a misinterpretation of Consultation Solution No. 204/2023, which deals with the deduction of expenses and investments incurred in rural production from the Individual Income Tax (IRPF).
This deduction is extended to the purchase and maintenance of aircraft used in agricultural activities, such as aircraft used for spraying and applying pesticides and fertilizers.
However, deductions are not allowed by the RFB when aircraft are used to transport people, even if they are used for commercial purposes to sell or manage rural production.
The “Declara agro” operation was based on an analysis of the LCDPR of taxpayers located in Goiás, Mato Grosso, Mato Grosso do Sul and the Federal District. According to the Brazilian Federal Revenue Service, income tax deductions totaling R$21.6 million were identified, possibly in breach of legislation, in the period from 2020 to 2022.
It is worth noting that the taxpayers notified will have until August 31, 2024 to regularize their returns. In addition, in order to avoid the imposition of an ex-officio fine, the undue expenses must be excluded from the IRPF Annual Adjustment Statement, through a rectifying statement, as well as paying the difference in income tax due.
Taxpayers who did not receive the notice in this first phase of the “Declara agro” operation, but who are not in compliance, will be able to regularize their situation if they have deducted these expenses that are not essential to the development of their activity. The RFB has indicated that the operation will continue with other stages of notification.
Thus, taking into account that, in the event of the RFB levying the tax ex officio (if the notification is not complied with), the established penalty is 75% of the difference in the tax assessed. It is important that rural producers review the costs deducted for aircraft purchases or maintenance declared in the LCDPR, in order to maintain their compliance with the RFB and not attract unwanted costs with the application of significant fines.
If you have any questions, our tax team is at your disposal for clarification and guidance.
