In this Tax Law newsletter, you will find:
- STF guarantees tax anteriority in case of revocation of tax benefit
- STF rules out ISS tax on contract manufacturing
- STJ: Relevant period for tax credit offset refers to date of the taxable event
- STJ rules in favor of income taxation on late payment interest
- STF recognizes preference of lawyer’s fees over tax credits
- STF prohibits ITCMD on private pension plans
STF guarantees tax anteriority in case of revocation of tax benefit
The Federal Supreme Court (STF), in a unanimous decision rendered in a virtual plenary session, held that the revocation of tax benefits must comply with the constitutional principle of tax anteriority, requiring a minimum period of 90 days or one year before producing effects, as provided for in the Federal Constitution (depending on the regime of each tax).
The prevailing opinion was delivered by Justice Luís Roberto Barroso, who reaffirmed the Court’s settled case law regarding the application of the anteriority principle in cases where the elimination of tax benefits results in an indirect increase in the tax burden — that is, where the reduction of incentives leads to an effective increase in the amount of tax due. This decision, which has general repercussion, was issued in Extraordinary Appeal No. 1.473.645 (Theme 1.383) and followed the precedent established by the STF in 2019. The Court upheld the annulment of an ICMS tax assessment challenged by the State of Pará, which had arisen from the withdrawal of a fiscal incentive previously granted to a company.
STF rules out ISS tax on contract manufacturing
The Federal Supreme Court (STF) has declared the unconstitutionality of the levying of the Municipal Services Tax (ISS) on intermediate stages of the production process involving contract manufacturing – when a third party is contracted to develop part of the industrialization process. The ruling is binding on all lower courts.
The leading case, Extraordinary Appeal No. 882,461 (Theme 816), analyzed the levying of the tax on activities listed under item 14.05 of Supplementary Law No. 116/2003 (law that regulates the ISS), specifically with regard to steel cutting services, which were deemed to be intermediate manufacturing processes.
The Court held that contract manufacturing does not qualify as a service, but rather constitutes an intermediate stage in the production of goods. Justice Dias Toffoli emphasized that, by failing to exclude goods destined for further industrialization or commercialization, the law distorted the material criteria of the ISS tax and violated the Federal Government’s and States’ tax competence.
In the same judgment, the Plenary also established a 20% ceiling for late payment penalties imposed by the Union, States, Federal District, and Municipalities, in order to prevent excessive and disproportionate tax sanctions.
STJ: Relevant period for tax credit offset refers to date of the taxable event
The First Panel of the Superior Court of Justice (STJ) unanimously held that, for purposes of determining the applicable rules for offsetting tax credits recognized through judicial decisions, the relevant date is the date of the triggering event of the tax, rather than the date on which the judicial decision became final and unappealable.
The case concerned the possibility of using federal tax credits to offset social security contribution debts (and vice versa), a mechanism commonly referred to as cross-compensation, in relation to credits arising before the enactment of Law No. 13.670/2018, which introduced such possibility. Taxpayers argued that if the judicial decision recognizing the credit became final after the enacting of said law, those credits should be treated as “subsequent” to it, thereby allowing for cross-compensation.
The Panel followed the opinion of the reporting Justice, Sérgio Kukina, and denied the taxpayer’s appeal, holding that if the taxable events occurred prior to the implementation of the e-Social system (as provided by Law No. 13.670/2018), cross-compensation would not be permitted.
STJ rules in favor of income taxation on late payment interest
The Second Panel of the Superior Court of Justice (STJ) held that IRPJ and CSLL (income federal taxes) are levied on late payment interest received by legal entities due to the delayed payment of credit instruments.
The reporting Justice, Afrânio Vilela, reasoned that late payment interest aim to compensate a loss of profit, which justifies its subjection to taxation.
This position diverges from the precedent established by the Federal Supreme Court (STF) in Theme 962, in which the Court held that SELIC interest accrued on tax refunds is not subject to IRPJ or CSLL, even though the SELIC rate includes a remunerative interest component in addition to monetary correction. Nevertheless, the STJ’s decision aligns with its prior ruling in Theme 504, which addressed the taxability of interest accrued on the return of judicial deposits.
STF recognizes preference of lawyer’s fees over tax credits
On March 31, by a majority of eight votes to three, the Federal Supreme Court (STF) ruled that attorneys’ fees take precedence over tax credits. With this decision, the Justices upheld the provision of the Brazilian Code of Civil Procedure (CPC) that classifies attorneys’ fees as having an alimentary nature and equates them to labor-related credits.
The majority of the Court adopted the position of the reporting Justice, Dias Toffoli, who upheld the constitutionality of Paragraph 14 of Article 85 of the Code of Civil Procedure. According to his reasoning, this provision validly establishes that attorneys’ fees—including those arising from contractual arrangements—shall take precedence over tax credits. This interpretation is consistent with Article 186 of the National Tax Code, which allows for the prioritization of certain types of claims, particularly those of an alimentary nature, such as labor credits.
The matter was adjudicated under the general repercussion doctrine in Extraordinary Appeal No. 1,326,559 (Theme 1220), meaning that the precedent established by the STF must be followed by all lower courts within the Brazilian judiciary.
STF prohibits ITCMD on private pension plans
On March 27, 2025, the Federal Supreme Court issued a final and binding decision declaring the unconstitutionality of the imposition of the ITCMD (Inheritance and gift tax) on amounts received by beneficiaries of open private pension plans, specifically the VGBL and the PGBL, which are types of private pension plans commonly used for retirement and estate planning purposes.
The ruling was rendered in Extraordinary Appeal No. 1,363,013/RJ (Theme 1214). The STF’s Plenary based its decision on the fundamental distinction that amounts derived from VGBL and PGBL plans do not constitute inheritance but rather arise from the contractual execution of a life insurance policy.
The decision is binding on all courts and judges throughout the country.
