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Trial Initiated by Edson Fachin Proposes to Recognize Unconditional Exemption of ITBI, Which May Prevent Municipalities from Collecting the Tax on the Transfer of Properties for Capital Formation
The Supreme Federal Court began to judge one of the most awaited tax cases of the year: the possibility of total ITBI exemption in the operations of capital stock integration of companies. If confirmed, the impact could be billion-dollar, reducing municipalities’ revenue and changing the way companies transfer real estate when forming or expanding their capital.
The rapporteur, Minister Edson Fachin, voted to recognize that the exemption is unconditional, meaning it should be applied regardless of the company’s business sector, including those operating in the real estate sector. The thesis, if consolidated, will consolidate a nationwide precedent and may nullify several charges already made by municipalities.
The Trial and the Central Thesis
The trial currently underway in the virtual plenary of the STF analyzes Extraordinary Appeal 1.495.108, presented by a company against the municipality of São Paulo.
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The discussion revolves around the scope of ITBI tax exemption (Tax on Transmission of Real Estate) provided for in Article 156, §2, I, of the Federal Constitution.
According to Fachin, the exemption should fully encompass the transfer of properties used to integrate capital stock, that is, when a partner delivers an asset to the company as a form of contribution.
He argued that the constitutional exception provided, which excludes only corporate restructuring operations, such as mergers, splits, and incorporations, does not extend to companies in the real estate sector, as some municipalities argue.
According to the minister, the 1988 Constitution did not receive the limitation existing in the National Tax Code, which conditioned the exemption to the enterprise’s activity.
“The constitutional norm aims to stimulate capitalization and strengthen free enterprise without creating sectoral distinctions,” wrote Fachin in his vote.
Billion-Dollar Impact and Reaction from Municipalities
If the thesis of total ITBI exemption is approved, experts estimate that thousands of municipal charges may be annulled, causing a direct impact on local finances.
Cities with a large number of corporate operations, such as São Paulo, Rio de Janeiro, and Belo Horizonte, would be the most affected, as the ITBI is one of the main sources of municipal tax revenue.
Municipalities argue that by applying the exemption unrestrictedly, the STF would be opening a loophole for abusive tax planning, allowing companies to transfer properties under the pretext of capital integration solely to avoid paying the tax.
On the other hand, business entities argue that exemption is a constitutional right and that its limitation discourages investments and corporate formalizations.
The trial occurs at a time of fiscal tension between the Union, states, and municipalities.
“The full application of the exemption may reduce municipal revenue, but it strengthens the business environment and legal certainty for companies,” evaluates a tax specialist consulted by specialized outlets.
Support and Divergences in the Supreme Court
Minister Alexandre de Moraes fully supported Edson Fachin’s vote, reinforcing that the ITBI exemption should be unconditional and cannot be restricted based on the company’s economic activity.
For Moraes, “the Constitution is clear in protecting capital integration as a tool for business strengthening, without making distinctions between sectors.”
With the trial underway in the virtual plenary, the other ministers are still expected to present their votes by the end of the week.
If Fachin and Moraes’s understanding prevails, the STF will consolidate a thesis of general repercussion that will serve as mandatory guidance for all courts in the country.
The proposed thesis presented by Fachin states:
“The ITBI tax exemption, provided for in art.156, §2, I, in the realization of capital stock through the integration of assets and values, is unconditional, therefore indifferent to the predominantly real estate activity.”
The Precedent of Topic 796 and the New Scope
The current judgment directly dialogues with Topic 796 of general repercussion, previously decided by the STF, which limited the exemption only to the amount effectively used to integrate capital stock, excluding the surplus.
Now, Fachin proposes an expansion of the understanding, eliminating restrictions related to the economic activity of companies.
This new stance seeks to correct interpretative divergences among regional courts, which applied different criteria on when the ITBI should or should not be collected.
The unification of jurisprudence is seen as essential to reduce legal uncertainty and the buildup of tax actions.
The outcome of the trial may redefine the relationship between companies and municipalities in collecting the ITBI. If the Supreme confirms the total ITBI exemption in capital integrations, companies transferring properties for their establishment or expansion will be exempt from paying the tax, consolidating a significant victory for the productive sector.
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