The Federal Supreme Court discussed a very important leading case that was moving in the direction of changing the Court’s case law on tax matters related to res judicata.

The votes on the case, reported by Minister Luiz Edson Fachin, had already formed a majority in the Court (RE 949.297), in the sense that the final and unappealable tax decision could be changed in cases in which the STF declared that a tax originally considered illegal is, in fact, constitutional – in a decision with erga omnes effect (i.e., applicable to all), under the concentrated control of constitutionality.

In practice, if the final decision confirms the votes already proffered, it would mean authorizing the charging of the tax even for taxpayers who had a previous judicial decision against it. It would be possible if the payment of such tax was recognized as valid by a new understanding of the Supreme Court. This is viewed as a real revolution in terms of Brazilian legal security.

Another appeal discussing the matter (RE 955.227), under the reporting of Justice Luís Roberto Barroso, is also being heard, which discusses what happens to the final tax decision when the STF pronounces otherwise – in individual decisions, with inter partes effect, in the scope of diffuse control of constitutionality. In this judgment, there are still only five votes deposited.

In summary, the new theses proposed by the Supreme Court were as follows:

In RE 949.297, the thesis proposed by Justice Luiz Edson Fachin was:

• The temporal efficacy of material res judicata derived from a tax relation of continuous events has a resolutive condition that is implemented with the publication of the decision of a subsequent trial held in abstract and concentrated control of constitutionality by the Federal Supreme Court, when the decision commands are opposed, observing the constitutional rules of non-retroactivity, annual anteriority and noventene or nonagesimal anteriority, according to the tax species in question.

In RE 955.227, Justice Luís Roberto Barroso proposed two theses:

• The decisions of the STF in incidental control of constitutionality, previous to the institution of the general repercussion regime, do not automatically impact the res judicata that has been formed, even in tax legal relations of successive tract.
• On the other hand, decisions handed down in direct actions or general repercussion decisions automatically interrupt the temporal effects of final and unappealable decisions in such relations, respecting the principle of non-retroactivity, annual anteriority and the noventene or nonagesimal anteriority, depending on the nature of the tax.

As regards the specific case, the two leading cases are concerned to the Social Contribution on Net Profits (CSLL), a tax created by Law 7689/1988 and the applicability of which was initially excluded by court decisions on the grounds that it could only be instituted by means of a supplementary law.

As of 1992, the STF started to issue individual decisions declaring the constitutionality of the CSLL. However, it was only in 2007, after the introduction of the general repercussion system, that the Supreme Court ruled on the issue with erga omnes effects (for everyone).

The Federal Government then started to understand that everyone should pay the contribution, including those who already had a final and unappealable decision ruling out the applicability of the tax, while the taxpayers defended the prevalence of the res judicata. This is also the reason why the Tax Authorities have issued numerous tax infraction notices and the companies on the matter.

Currently, the judgment of both lawsuits are suspended, with the request of Justice Edson Fachin issued on November 22, 2022, so that the discussions will be transferred from the virtual environment to the presential Plenary of the Court. The votes then will be reopened with a zero score. So far, there is no information about the date of the presential trial.

Finally, it is worth noting that the present discussion is of such magnitude that, when the decision is rendered, it may cause a significant financial impact government budget and on all proceedings that discuss the payment of taxes in general.