In Brazil, when a tax is found unconstitutional by the Brazilian Supreme Court (STF), it still can be charged against companies and financial institutions regarding the past. This is due to a judicial technic called “modulation of effects of the rulings”.
Basing the decision on reasons of “legal certainty”, the STF can apply this technic. It used to be an exception, but lately it is being used more and more. Last week it was used in two cases of high impact.
The first one regards taxation on software. The decision of software being taxed under ISS (Municipal tax) and not ICMS (a VAT-like tax) will only take effect from now on.
The second case was the declaration of unconstitutionality of a “VAT” levied in interstate e-commerce. The Court has decided to postpone the effects of the decision to 2022. So, until then the unconstitutional tax is valid.
There are exceptions in both cases, but the main ruling says exactly this.
In both cases, the STF fixed a main exception to the rule that the unconstitutional tax is valid for the past and invalid for the future. It stated that taxpayers that have filed lawsuits discussing the taxes can recover the unconstitutional tax paid in the past. But those who did not file a lawsuit discussing it, cannot recover the taxes.
Putting aside the critics of all this procedure (and there are a lot), the fact is that the taxpayer only can be really beneficiated of a decision by the supreme court that found a tax unconstitutional if he filed a lawsuit in the right time.
So, if a tax is currently being challenged in Court, companies should seriously consider filing lawsuits in advance for extra security. Taxpayers in the similar situations are being treated differently. If the discussion has great impacts within the business, a thoughtful evaluation is even more crucial, because it represents an even bigger loss if the company is being passive while competitors are acting in advance and already discussing these matters in Court.