Importers assessed a 1% customs fine may benefit from recent decisions by CARF – the Administrative Council for Tax Appeals which have set aside the application of this penalty.
To provide some context, the 1% fine on the customs value of the goods was historically imposed in cases of violations related to incorrect tariff classification or incomplete descriptions of imported goods on the import declaration.
In these situations, regardless of whether the error in completing the declaration resulted in differences in the amounts due, the penalty was automatically imposed.
With the enactment of Constitutional Law nº. 227/2026, which governs tax reform, the customs fine was expressly repealed. In recent rulings, CARF has begun to apply this change retroactively, annulling the penalty based on the principle of retroactivity of the penalty provision most favorable to the taxpayer.
Given this scenario, we highlight 3 key points:
1. Scope of the Law’s Retroactive Application: The application of a law to a past act or event may occur when the new law no longer defines a certain conduct as a violation or establishes a penalty less severe than that provided for in the legislation in force at the time of the events. This is the rule set forth in the National Tax Code, provided that the act has not been definitively adjudicated. Thus, ongoing administrative proceedings, including those pending before CARF, may be directly affected by the repeal of the fine.
2. Implications for Tax Enforcement Proceedings: Companies already facing tax enforcement proceedings, whether active or suspended, related to this penalty may consider challenging the enforcement on the grounds of the more favorable supervening legislation. Depending on the stage of the proceeding, and provided that a final judgment has not yet been rendered, the cancellation of the fine may be raised, especially when the collection is based exclusively on this penalty. Furthermore, the nullity of the fine may result in the complete nullity of the certificate of outstanding debt and, consequently, in the termination of the tax enforcement proceeding.
3. Impact of the Revocation of the Fine on Pending Assessment Notices: In numerous customs assessment notices, the 1% fine was imposed independently, without the concurrent assessment of taxes, particularly in cases of discrepancies in tariff classification or descriptions of the goods in the import declaration that were deemed incomplete. In such cases, the revocation of the penalty may undermine the legal basis of the assessment and allow for the full cancellation of the assessment notice.
On the other hand, when the assessment also involves tax differences or other penalties, the exclusion of the 1% fine does not necessarily invalidate the entire assessment. Nevertheless, it requires a reassessment of its composition, excluding the revoked penalty and potentially adjusting the remaining tax liability.
Recent CARF decisions point to an important path for reviewing tax assessment notices and reassessing tax liabilities related to imports.
In this context, it is recommended that importers review their tax assessment notices, administrative proceedings, and any judicial collection actions to assess the impacts of this ruling and identify opportunities to revise their tax liabilities.
