Discussion on limits for tax penalties at the Supreme Federal Court.

In tax law, conceptually, fines are intended to sanction the taxpayer for non-compliance with tax obligations and can be classified as:

→ Late Payment Fine

→ Official Fine

→ Isolated Fine.

Despite their punitive nature, the Federal Constitution has defined the limits of proportionality, reasonableness, and non-confiscation in the application of fines, and it is up to the Judiciary to analyze the abuse of these constitutional limits.

Below, see the cases judged (or pending judgment) by the STF (Supreme Federal Court) regarding these fines.

Late Payment Penalty Limits

Concept:  Late payment penalties apply in cases of failure and/or delay in the payment of taxes.

Case under analysis: 

→ RE 882.461 (General Repercussion Theme 816) : the STF (Supreme Federal Court) defined that “Late payment penalties instituted by the Union, States, Federal District and municipalities must observe the ceiling of 20% of the tax debt”.

The STF also concluded that the temporal variation of the late payment penalty must be fixed by the legislation of the Federative Entities themselves (Union, States and Municipalities), so that the penalty may be applied as a daily or monthly percentage (for example) up to the limit of 20%.

Limits of the Official Fine

Concept: Just like late payment penalties, official penalties are applied in cases of failure and/or delay in the payment of taxes.

Case under analysis:

→ RE 1.335.293 (General Repercussion Theme 1.195): the STF (Supreme Federal Court) will still analyze the application of official penalties at a level exceeding 100% of the tax due.

The matter has already been the subject of judgment in ADI 551/RJ, in which the unconstitutionality of a state law that provided for the application of a penalty exceeding 100% in case of non-payment or tax evasion was recognized.

Limits of the Isolated Fine

Concept: The Isolated Fine aims to punish the non-compliance with ancillary obligations, such as not submitting certain declarations to the Tax Authority.

Cases under analysis:

→ ADIs 551/DF and 1.075/DF: the STF (Supreme Federal Court) defined the limit of 100% of the value of the tax due for isolated fines.

→ RE 736.090 (General Repercussion Theme 863): fines applied in cases of tax evasion, fraud, or collusion should be limited to 100% of the tax debt, with the possibility of the value reaching 150% of the debt in case of recidivism.

→ RE 796.939/RS (General Repercussion Theme 736): the application of isolated fines in the case of unapproved tax compensation is unconstitutional.

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The De Vivo, Castro Advogados team is available to answer any questions related to this topic.