This week Brazilian Supreme Court (STF) will start the judgment on the Wealth Tax (WT).
Congress has the possibility for creating the WT for 33 years, provided since the birth of Brazilian Constitution in 1988, but it never created the necessary law for such a tax.
Now, the STF, if it upholds the demand, will be able to decide whether it (the Court) will create the tax during the omission of Congress. Or if it sets a deadline for Congress to create the necessary law for creation and enforcement of the WT.
Until now it is known the vote of the first justice, which upholds the demand and chooses to set a deadline for Congress to create the tax. Deadline that has not yet been suggested.
This theme generates several discussions. We understand that taxation in Brazil is already extremely high, both for companies and individuals, and such a tax would only add a greater tax burden, which is undesirable at this time.
Furthermore, it is not clear what size of equity, nor what types of assets (real estate, investments, securities, etc.) would be affected by the WT. Not even if such a tax would reach the equity/assets of legal entities. In the latter case, the tax would be especially harmful, as it would affect the capital used precisely to promote and encourage investment and growth of companies, businesses, and the economy as a whole.
The important thing, at this moment, is to carefully monitor the evolution of the topic, as well as review each taxpayer’s business and tax planning.
