The Supreme Federal Court will resume the trial of the constitutionality of the isolated fine of 50% on non-approved compensations, between 03/10/2023 and 03/17/2023. Currently, the matter is being discussed both within the scope of Extraordinary Appeal (RE) No. 796,939 (Theme 736 of General Repercussion) and in the Direct Action of Unconstitutionality (ADI 4905), which deal with the isolated fine provided for in §17 of article 74 of Law 9,430/96.

The aforementioned device determines that in the event of a denial of a request for compensation, an isolated fine of 50% will be applied on the amount of the debt that was the subject of the compensation declaration.

Well, the STF should continue analyzing the ADI filed by the National Confederation of Industry (“CNI”), which challenges article 74 of Law No. 9,430/1996 and its §§ 15 and 17, which established the provision of an isolated fine of 50% on the amount of the credit subject to the denied or undue reimbursement request and, also, on the amount of the credit subject to an unapproved offset declaration. However, the CNI claims that such changes were intended to, by means of the threat of imposing a fine of 50%, discourage the citizen-taxpayer from exercising his constitutional right to petition the public authorities and recover amounts unduly collected into the public coffers.

In view of this, it states that the imposition of a fine under the terms set out in §§ 15 and 17 of the aforementioned Law violates i.) the fundamental right to petition public authorities; ii.) the fundamental right to adversarial proceedings and full defense (art. 5, LV, of the CF/88); iii.) the prohibition of the use of taxes with confiscatory effects (art. 150, IV, of the Federal Constitution); iv.) beyond the principles of reasonableness and proportionality; v.) resulting in a true political sanction, which is unconstitutional.

We recall that the judgment of the ADI began in 2020, and already has two votes for partial knowledge of the ADI and, in the known part, for the admissibility of the request to declare the unconstitutionality of §17 of the aforementioned art. 74 and, by extension, also the unconstitutionality of item I, §1, of art. 74 of IN RFB 1.717/2017.

In turn, with reference to theme 736 of General Repercussion (RE 769939), the virtual plenary of the Supreme Court should also resume its assessment, which is related to the unconstitutionality of the imposition of the fine provided for in art. 74, §§ 15 and 17, of Law No. 9,430/1996 for cases of denial of reimbursement requests and non-approval of credit offset declarations before the Federal Revenue Service.

The trial began virtually on April 17, 2020, when the rapporteur of the case, Justice Edson Fachin, voted for the unconstitutionality of the isolated fine, as he understood that its application cannot be correlated to the request for compensation, which is not an unlawful act, and also violates the right to petition. The first trial was interrupted by a request for review by Justice Gilmar Mendes and resumed on May 8, 2020, when Justices Luiz Fux, Celso de Mello, Gilmar Mendes and Alexandre de Moraes also voted for the unconstitutionality of the fine. However, Justice Luiz Fux requested that the case be highlighted, restarting the trial and taking it to the physical plenary.

On June 1, 2022, the case was scheduled by the STF, but was not tried in person due to lack of time. Therefore, the case was reinserted into the list of trials to be held by the virtual plenary.

As seen, the subject of discussion in these cases is that the application of an isolated fine due to the denial of the request for compensation is not related to its purpose, which would be to punish an unlawful act. Furthermore, its application may discourage the right to petition, since even taxpayers who used the compensation in good faith may be punished with a confiscatory fine, due to the high percentage.

In the general context, it is expected that both judgments will be favorable to taxpayers, due to the votes already cast in previous sessions, expecting predictability within the ministers' positions.

Our tax team will follow and monitor the judgment of the topic at hand, as well as any developments and events, and is available for any clarifications.