News

The Brazilian Federal Supreme Court (STF) concluded the judgment of General Repercussion Theme 1,455 and unanimously ruled that setting the IPTU tax rate based on the property’s area is unconstitutional when established by municipal law enacted after Constitutional Amendment No. 29/2000.

The binding precedent will guide lower courts in similar cases. The dispute arose from a law enacted by the Municipality of Chapecó, in the state of Santa Catarina, which established a 1% IPTU rate for residential properties with a built area of 400 m² or more. The central issue was whether, following Constitutional Amendment No. 29/2000, the property’s area could be used as a criterion to establish differentiated or progressive tax rates.

In the judgment, Justice Dias Toffoli, the reporting justice, emphasized that the Constitution authorizes progressive IPTU taxation based on the value of the property, as well as differentiated rates according to its location and use. According to the STF, however, the built area does not correspond to these criteria and cannot, by itself, justify the application of a higher tax rate.

In practice, the decision reinforces that municipalities must comply with the criteria expressly established in Article 156, § 1, of the Federal Constitution when differentiating IPTU rates.

For taxpayers, the ruling may create opportunities to review tax assessments based on municipal laws that are incompatible with the Constitution, including the possibility of seeking refunds or offsets of amounts unduly paid, subject to the specific circumstances of each case and applicable procedural and time limitations.

Property owners subject to IPTU rates calculated based on built area should review the applicable municipal legislation and assess the potential impact of the ruling on current and past tax assessments.