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New Law Defines Chronic Debtor with Objective Criteria, Links Large Tax Debts to Money Laundering and Criminal Organizations, Toughens Criminal Penalties, Blocks Tax Benefits, Bids, and Judicial Recovery, Extends Liability to Related Parties, and Forces Companies and Managers to Negotiate Debts Before It’s Too Late Under Growing Pressure.
According to the Conjur portal, with the approval by Congress of Complementary Law Project No. 125/2022, which creates a New Law specifically to categorize the chronic debtor, tax noncompliance is no longer just a tax problem and now directly threatens the assets and freedom of administrators. The rule removes the figure of the chronic debtor from the former gray area, previously supported by fluctuating jurisprudence from the superior courts, and transforms it into a clear legal category with immediate criminal effects.
At the same time, recent police operations in the fuel sector reveal schemes where large amounts of unpaid taxes are reintegrated into the economy through fronts and shell companies, in connection with money laundering and organized crime. In this new scenario, Complementary Law Project No. 125/2022 toughens the criminal treatment of those who insist on not paying, prohibits the extinction of punishability for the chronic debtor and transforms the risk of imprisonment, asset blocking, and loss of the company itself into a concrete threat for those who live off tax defaults.
Who Is the Chronic Debtor in the Eyes of the New Law
The big shift of the New Law is in abandoning vague and subjective concepts to define who the chronic debtor is.
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The text establishes objective and cumulative criteria, requiring that noncompliance be substantial, recurrent, and unjustified. It’s not enough to owe a little or to default just once, nor to cite generic difficulties: the target of the rule is anyone who makes noncompliance a permanent business strategy.
At the federal level, the New Law requires debts over 15 million reais, which exceed the known assets of the debtor and drag on for long periods without any regularization.
These elements, combined, construct the profile of someone who has not only stopped paying but has started to use non-payment as a means of financing their own economic activity.
In States and Municipalities, local legislation may set distinct and potentially more stringent limits, opening space for taxpayers with smaller debts to also be classified, according to the fiscal policy of each federative entity.
Managers in Direct Sight of Criminal Justice
The New Law does not only target the legal entity. In situations where there are signs of fraud, organized structures to evade taxes, and the use of fronts or shell companies, criminal measures now directly target the managers, who can face preventive detention and personal asset freezes.
Classification as a chronic debtor serves as a warning sign for the Public Prosecutor’s Office and the police that the case may go beyond simple noncompliance.
In practice, this means that paying the overdue tax is no longer enough to get out of the line of fire of Criminal Justice. By prohibiting the extinction of punishability for those declared chronic debtors, the New Law transforms the full payment of the tax, along with fines and interest, into mere satisfaction of the tax credit.
The criminal process follows its normal course, and the conviction ceases to be a remote threat to become a real risk for administrators and partners who led the company down the path of systematic tax evasion.
Extension of Liability to Related Parties and Economic Groups
Another sensitive point of the New Law is the possibility of extending the classification of chronic debtor to related parties of legal entities that have been dissolved or declared unfit and have significant liabilities.
In practice, this means that the irregularity of a subsidiary or affiliated company can contaminate the entire economic group, bringing into the same web of liability companies that, in isolation, would appear to be healthy.
This legal framework increases the State’s power to react against corporate structures created to “run debts” under different social reasons and abandon companies laden with liabilities.
On the other hand, it opens space for intense discussions in the Judiciary, which will have to impose limits so that the rigor against noncompliance does not destroy legitimate corporate structures.
The line between combating planned frauds and punishing groups that merely divided activities for legitimate business reasons will be one of the great challenges in applying the New Law.
Unfair Competition and More Severe Economic Sanctions
The identification of the chronic debtor meets a clear market interest: the protection of free competition. Complementary Law Project No. 125/2022 is based on the premise that this debtor not only harms public coffers but engages in unfair and predatory competition.
By appropriating amounts that should be collected as tax, the chronic debtor gains an artificial competitive advantage, allowing them to practice prices below those of competitors who regularly pay their taxes.
To correct this distortion, the New Law provides for harsh economic sanctions, such as the prohibition of enjoying tax benefits, the ban on participating in bids, and perhaps most dramatically, the prohibition on filing for judicial recovery by the chronic debtor.
This way, the State removes the main legal instruments for the resumption of the company, bringing it closer to a true operational asphyxiation.
The message is clear: those who use non-payment of taxes as a business model will not receive lenient treatment either in the economic or criminal fields.
Compliance Programs as Legal Shields for the Good Payer
The New Law, however, is not limited to punishment. The text also establishes compliance programs, such as “Confia” and “Sintonia”, designed to reward the good payer and encourage self-regulation.
These programs offer structured channels for dialogue and voluntary correction of irregularities, before the situation migrates to the criminal sphere.
More than a reputational benefit, adherence to compliance programs can become a central criminal defense strategy.
Being classified with a “Compliance Seal” generates a probative foundation of good faith, reinforcing the thesis that any failures were isolated, corrected spontaneously, and without intent to defraud the Treasury.
In cases of investigation or criminal action, this evidence can be decisive in dismissing intent and differentiating those who made operational errors from those who actually planned and executed structured tax evasion schemes.
Time to Decide: Regulate or Face the New Criminal Scenario
With the New Law and the advancement of police operations linking tax crimes to money laundering and organized crime, the window of opportunity to regularize debts is narrowing.
Debtors who still have the opportunity to parcel or settle taxes and, with that, end the criminal discussion, may see this path disappear definitively if classified as chronic debtors.
In this context, companies and managers need to urgently review their fiscal and criminal strategies.
Negotiating, settling debts, and joining compliance programs may be the difference between maintaining economic activity or facing asset freezes, loss of benefits, exclusion from bids, and real prison risk.
In your assessment, can the New Law punish those who make tax evasion a business model without suffocating companies and managers who have erred but want to regularize in good faith?
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