The Brazilian Supreme Federal Court (STF)¹ will resume judgment, between May 16 and 23, on the constitutionality of imposing isolated penalties exceeding 20% for breaching ancillary tax obligations², such as failing to submit tax information. The case is being analyzed under Extraordinary Appeal 640.452, with general repercussion recognized under Theme 487, and directly impacts hundreds of suspended cases across Brazil.

The reporting justice, Minister Luís Roberto Barroso, voted to limit the penalty to 20% in cases where the ancillary obligation is linked to a primary obligation, meaning when there is tax to be collected. However, Minister Dias Toffoli presented a divergent opinion, proposing different criteria: for cases involving linked taxes, the penalty could reach up to 60%, and up to 100% in aggravating situations; in cases without tax but with operational value, the penalty would be limited to 20%, with possible increase to 30% in aggravated circumstances.

The trial began in November 2023 but was interrupted by the reporting justice’s highlight request³ when the score was tied. However, two months later, the justice withdrew the highlight request, and with the case’s resumption in virtual plenary⁴, the votes already presented remain preserved.

Therefore, the Supreme Court’s decision in this case will have direct implications for taxpayers penalized for failing to comply with ancillary obligations, such as submitting declarations or meeting formal requirements, and may establish parameters for limiting penalties applied by the Brazilian Tax Authority⁵.

¹ STF (Supremo Tribunal Federal) is Brazil’s highest court, equivalent to a Supreme Court.

² Ancillary tax obligations in Brazil refer to formal requirements such as maintaining records, submitting declarations, and providing information to tax authorities.

³ A “highlight request” (pedido de destaque) is a procedural mechanism that transfers a case from virtual to in-person judgment.

⁴ Virtual plenary is an online judgment system where justices can cast their votes electronically without meeting in person.

⁵ Fazenda Pública refers to Brazil’s Tax Authority and other government financial bodies.