Supreme Court defines scope of decision on property tax rate based on property area.

The modulation preserves charges and payments prior to the date of the establishment of the general repercussion thesis.

Credits: STF

The Brazilian Supreme Federal Court (STF) has ruled that the decision prohibiting municipalities from setting property tax (IPTU) rates based on property area will take effect on August 12, 2026, the date the minutes of the judgment establishing the precedent on the matter were published. This preserves charges and payments made before that date, as well as administrative processes and lawsuits that were still pending.

The decision was made in the virtual session that ended on October 9, in the judgment of an appeal (motion for clarification) in Extraordinary Appeal with Aggravation (ARE) 1593784 .
Context

In the virtual session that ended on August 5th, the Plenary established the general repercussion thesis (Theme 1,455) that it is unconstitutional for a municipal law to set the IPTU (Property Tax) rate based on the area of the property after Constitutional Amendment 29/2000. This understanding will be applied to all similar cases pending in the courts.

The case involved a law in Chapecó (SC) that established a 1% property tax rate for properties with a built area equal to or greater than 400 m². The Court of Justice of Santa Catarina (TJSC) declared the rule unconstitutional, determined the application of the 0.5% rate, and ordered the return of the amounts overpaid.

By unanimous vote, the Supreme Federal Court (STF) rejected the municipality’s appeal against this decision and affirmed that the progressive tax rate for property tax (IPTU) must consider the property’s value. The Municipality of Chapecó then filed a motion for clarification, alleging contradictions, omissions, and a lack of clarity in the decision.
Scope of the decision and financial impacts

The appeals were accepted only in relation to the request to modulate the scope of the decision. The rapporteur, Minister Dias Toffoli, considered the possibility that other municipal laws might provide for the same form of taxation without having been challenged in court.

It also took into account that applying the decision retroactively could have a significant impact on municipal finances. The Municipality of Chapecó reported that the updated value of tax refunds would reach approximately R$ 14 million. The Brazilian Association of Finance Secretariats of Capital Cities (Abrasf) warned that the return of funds could compromise essential expenses and the provision of public services in the areas of health, education, and security.

(Suélen Pires/CR//CF)

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