Brazil’s Supreme Court Forms Majority for 60% Cap on Fines for Tax Filing Errors

Overview

• A nonfinal majority of justices endorsed Dias Toffoli’s framework to cap fines for breaches of accessory tax obligations at 60% of the tax due, with up to 100% allowed in aggravated cases such as fraud or repeat offenses.
• Rapporteur Luís Roberto Barroso argued for a stricter 20% ceiling, but at least five justices have voted with Toffoli in the virtual plenary now underway.
• Toffoli detailed scaling for situations without an underlying tax debt, capping penalties at 20% of the operation value or up to 30% with aggravating factors.
• The case stems from Eletronorte’s challenge to a Rondônia rule that imposed a 40% fine for failing to issue invoices even when no ICMS was due, after an initial assessment exceeding R$160 million was later cut by lower courts.
• Toffoli proposed prospective effects to avoid mass refund claims, and the session is scheduled to run until 11:59 p.m. today, with the ruling set to bind lower courts and tax authorities once finalized.