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Arbitrary collection of ITBI in rural holding companies

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The STF has decided in their judgment regarding Extraordinary Appeal 796,376, Theme 796, with general effects, that the immunity of ITBI (Tax on Transmission of Real Estate), provided for in the Federal Constitution in art. 156, §2nd, II, does not apply to assets that exceed the paid-in capital. In other words: if the value of the property exceeds the value of the share capital to be paid up, ITBI will be charged, as it will be constituted as a capital reserve.

The thesis formulated by the Constitutional Court says that: “Immunity in relation to ITBI, provided for in item I of § 2 of art. 156 of the Federal Constitution, does not reach the value of the assets that exceed the limit of the capital stock to be paid in”.

However, this new decision has generated a discrepancy between the collection made by the municipalities and the existing rules of incidence of the ITBI, creating a scenario of legal uncertainty for rural holding companies, which, at the time of paying in the capital, have been suffering from the collection increased by the tax.

This is because the municipalities, responsible for carrying out the collection, use the understanding that real estate should always be paid at market value, and not at historical/book value, which is contrary to art. 23 of Law 9,249 / 95, which deals with the transfer of assets with the intention of paying in the equity capital and allows the individual to pay the asset for the amount contained in the declaration of assets.

Thus, it is being used as a strategy to increase tax collection by municipalities. Taxpayers harmed by the arbitrary action of the municipality can seek legal remedies to make it possible to obtain refunds for the overpaid amounts, given the administrative proof of the undue demands made by the relevant departments at the local prefecture.

Thomaz Mattos, a lawyer for Drummond Advisors, commented “The misinterpretation of federal constitutional legislation by municipal bodies has resulted in the systemic manifestation of these undue demands, and only reinforces how important it is for the taxpayer to be well legally advised. Quality estate planning safeguards the taxpayer, with security, legality, and also prevents future costs with administrative and judicial restitution processes.”