STF grant Taxpayers with exclusion of penalties in case of res judicata overruling (Leading Cases 881/885)

On April 4, 2024, The Brazilian Supreme Court (“STF”) concluded the judgment of the Motion to Clarify filed on Leading cases RE No. 949,297 (Tema 881) and RE No. 955,227 (Tema 885), related to the possibility of STF’s Case Law overrule an individual res judicata (final and unappealable decision).

The merits of the Leading cases were analyzed on February 8, 2023, when STF decided that:

• a STF binding precedent declaring the constitutionality of a certain tax charge would automatically cease the effects of an incompatible res judicata; and
• the constitutional principle called “princípio da anterioridade tributária” should be met, thus the tax collection could occur only after 90 days or in the next calendar-year as from STF’s decision that is opposite to the individual res judicata.

Given that the Superior Court of Justice (“STJ”) had a binding precedent opposite to STF’s conclusion on the Leading cases abovementioned (Temas 881/885), the parties and the amici curiae filed Motion to Clarify to discuss the modulating effects (i.e., to grant prospective effects only to STF’s decision).

On April 4, 2024, STF concluded the judgment of those Motion to Clarify and denied the modulation effects. However, STF also decided that Tax Authorities may not charge penalties on the amounts of taxes that Taxpayers did not collect due to the individual res judicata, maintaining the possibility to charge interest only.

It is important to mention that, during the trial, STF did not clarify: (i) the time limit for the dismissal of penalties, and (ii) the possibility of applying this understanding in all cases. These matters should be better explained upon the publication of the herein discussed decision.

Lefosse’s Tax Teams closely monitors the changes that impact Brazilian market. For further clarification on this matter, or others that may be of interest to you, contact our professionals.