Tax | Assets of Companies in Brazil Cannot Be Subject to Ownership Limitation by The Brazilian IRS Without Court Order

The Brazilian Supreme Court (STF) ruled that companies cannot have their assets subject to ownership limitation by the Brazilian IRS without a judicial decision authorizing it. Any violation of the fundamental right to property is extreme and demands judicial intervention.

The discussion involves a bill allowing the Brazilian IRS to directly make companies’ goods and rights unavailable if they have certified unpaid tax debts. This provision creates a possibility of “administrative tax enforcement proceeding”, coercing taxpayers to immediately pay instead of defending themselves in Court. But the Supreme Court ruling has ensured that it is not allowed, and due process is mandatory. 

Nevertheless, the ruling is only partially favorable to the taxpayers. The IRS listing assets and public registering debts is still allowed. The Court understands that these proceedings do not violate the right of property because they are “mere registers”. But it is a fact that the register and the listing of assets have practical consequences of getting in the way of negotiations.

Therefore, even though the ruling enforced the due process when right of property is involved, it is not all favorable. The ruling highlights the importance of companies monitoring closely their debts, obligations, and tax compliance. Even if it is not allowed to make assets unavailable, the listing of assets and the public register of debts could potentially harm negotiations.


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