STF Bars Municipal IPTU Hikes Based Solely on Property Size

The court’s unanimous repercussão geral thesis will guide lower courts and require municipalities to reassess local laws that raise IPTU by area.

Overview

The Supreme Federal Court issued a unanimous ruling that municipal laws setting higher IPTU rates only because a property is larger are unconstitutional and fixed the issue as a repercussão geral precedent.
The decision resolved ARE 1.593.784, a challenge to a Chapecó rule that charged 1% IPTU for buildings of 400 m² or more after the case was appealed from a Santa Catarina court.
The Tribunal de Justiça de Santa Catarina had already declared the Chapecó rule invalid and ordered the rate corrected to 0.5% and refunds to owners who paid the higher amount.
Relator Dias Toffoli said the Constitution allows IPTU progressivity by the property’s venal value and differentiation by location or use but does not permit size as an independent basis, noting that area may only affect tax through its effect on market value.
Because the plenary virtual session concluded on Aug. 5 and the court recognized general repercussion, similar municipal laws nationwide face legal challenges and local governments will likely need to repeal or revise area‑based surcharges.