Justice Alexandre de Moraes, from the Brazilian Supreme Court (STF), issued a new single-judge decision in the Declaratory Action of Constitutionality (ADC) 96, ruling out the possibility of retroactive collection of increased IOF tax rates* during the period when the Presidential Decree that promoted the tax increase was suspended.

In his decision, Justice Moraes acknowledged that during the Presidential Decree’s suspension, numerous financial operations were conducted based on the legitimate expectation that the increased rates were suspended. These transactions had already been settled under the regulations in force at that time, making subsequent collection both legally unstable and economically unfeasible. He also emphasized that the dynamics of financial operations subject to IOF tax presents technical obstacles to retroactive collection, which could increase litigation between tax authorities and taxpayers.

Even before this decision, the Brazilian Federal Revenue Service had already confirmed it would not demand retroactive collection from financial institutions that did not apply the new rate during the suspension period. However, it indicated it would analyze specific situations where taxpayers may have made undue payments, particularly for potential compensation or refund purposes.

Thus, Justice Alexandre de Moraes’ recent decision safeguards legal certainty for taxpayers who contracted loans or conducted financial operations during this period, mitigating the effects of the IOF tax increase in the financial sector while the Presidential Decree was suspended.

*Notes: IOF (Imposto sobre Operações Financeiras) is a Brazilian tax on financial operations, including loans, foreign exchange, insurance, and securities transactions.