STJ Affirms Non-applicability of Withholding Tax (IRRF) on Causa Mortis Transfer of Investment Fund Quotas
In the judgment of Special Appeal No. 1.968.695, the First Chamber of the Superior Court of Justice analyzed the applicability of the Withholding Tax (IRRF) on the transfer of investment fund quotas due to causa mortis succession. The appellants, heirs of Mr. Edson de Godoy Bueno, sought recognition that such a transfer, based on the values stated in the deceased's last Individual Income Tax Return (DIRPF), would not trigger the application of IRRF. The Federal Regional Court of the 3rd Region had previously ruled that, due to the "inevitable accounting alteration" caused by the succession, IRRF would apply. However, the STJ overturned this decision, clarifying that the transfer referred to in Article 65 of Law No. 8.981/1995 pertains to inter vivos transactions and does not encompass causa mortis transfers, which are specifically regulated by Article 23 of Law No. 9.532/1997. Furthermore, the STJ highlighted that Declaratory Interpretative Act ADI/SRFB No. 13/2007, which prescribes the application of IRRF in this context, exceeds its regulatory scope and is therefore illegal. Unanimously, the STJ partially upheld the special appeal, reinstating the lower court's ruling that granted the security, affirming that IRRF does not apply to the transfer of investment fund quotas by causa mortis succession when there is no redemption of the quotas and the heirs opt to maintain the values declared in the deceased's last DIRPF.
Discussion at the STF on ITCMD Incident on Private Pension Plans Suspended After Request for Review
The Supreme Federal Court (STF) resumed the judgment on the applicability of the Tax on Causa Mortis and Donation (ITCMD) on private pension plans, specifically the Free Benefit Generator Plan (PGBL) and the Free Benefit Generator Life Insurance (VGBL), which was interrupted after Minister Gilmar Mendes requested a review. The case, involving the taxation of these plans in the event of the holder's death, had already received votes against the tax from three ministers: Dias Toffoli (rapporteur), Alexandre de Moraes, and Flávio Dino. The request for review was made after these votes, and Gilmar Mendes now has up to three months to return the case. This judgment occurs alongside Congressional discussions on tax reform, which include the possibility of taxing these plans. A ruling from the STF declaring the tax unconstitutional could impact legislative plans. In his vote, Dias Toffoli highlighted that the VGBL should be treated as life insurance, where payments in the event of the holder's death do not constitute inheritance, thus excluding the applicability of ITCMD. He extended this understanding to the PGBL, stating that even as a pension plan, it shares characteristics with life insurance, especially in the context of succession. This case originated from a state law in Rio de Janeiro that authorized ITCMD on these two types of plans, but which was deemed unconstitutional by the Rio de Janeiro State Court of Justice (TJRJ) in the case of VGBL. Meanwhile, the House of Representatives recently approved a proposal allowing ITCMD on these plans, with an exemption for investors who keep their investments for more than five years. The text still awaits final analysis and voting on amendments before being sent to the Senate.
STF in Crucial Judgment: Inclusion of ISS in PIS and Cofins Calculation Base Remains Uncertain
The Supreme Federal Court (STF) resumed the judgment that began in August 2020, dealing with the inclusion of the ISS in the calculation base of the social contributions PIS and Cofins. The former rapporteur, Minister Celso de Mello, now retired, voted for the unconstitutionality of including the ISS, proposing that "the value corresponding to the ISS does not integrate the calculation base of the social contributions related to PIS and Cofins because the ISS qualifies as a simple financial inflow that merely transits without any definitive character through the taxpayer's patrimony and accounting, under penalty of violating Article 195, I 'b' of the Constitution (as amended by Constitutional Amendment No. 20/98)." Ministers Ricardo Lewandowski and Rosa Weber, both retired, also followed the rapporteur's vote, and these votes cannot be modified. Minister Carmen Lúcia also followed the rapporteur's vote, and on Wednesday, August 28th, Minister André Mendonça added another vote in favor of excluding the ISS, bringing the total to four votes against the inclusion of ISS in the PIS and Cofins calculation base. Conversely, Minister Dias Toffoli opened a dissenting opinion from the outset, proposing that "the value corresponding to the ISS integrates the calculation base of the social contributions related to PIS and Cofins." During the judgment, Toffoli maintained his position and was joined by Minister Gilmar Mendes. In the previous judgment, Ministers Alexandre de Moraes, Edson Fachin, and Roberto Barroso had already followed Toffoli, consolidating a block opposed to the exclusion of ISS. With the judgment currently tied, the final decision still depends on the remaining votes, including that of Minister Luiz Fux, who will be decisive in the outcome. This judgment has significant economic implications, as if the STF decides to exclude the ISS, the financial impact on the federal government could reach R$ 35.4 billion over five years, as projected by the Budget Guidelines Law (LDO). The outcome of this judgment, in addition to determining the constitutionality or otherwise of including the ISS in the calculation base of PIS and Cofins, will also define important guidelines on the interpretation of revenue and income concepts in the Brazilian tax context.
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