STF Rules Municipalities Cannot Raise IPTU Solely by Property Area

Overview

• The Supreme Federal Court issued a unanimous decision in ARE 1.593.784 that a virtual plenary concluded on August 5th, holding that municipalities may not set higher IPTU rates only because a property has a larger area.
• The ruling, authored by rapporteur Dias Toffoli, established a thesis of repercussão geral that must guide lower courts and similar cases across Brazil.
• The case arose from a Chapecó law that fixed a 1% IPTU rate for buildings with built area of 400 m² or more; the Tribunal de Justiça de Santa Catarina had already declared that local rule unconstitutional, set the rate to 0.5% and ordered repayment of excess charges.
• Owners and companies affected by size‑based IPTU rules can now seek recalculation and restitution of amounts paid, and municipalities that use area as a direct criterion will need to revise their codes to avoid litigation.
• The Court left room for nuance by confirming that area may affect IPTU indirectly if it changes a property’s venal value, while reiterating that the Constitution only authorizes progressivity by value and differentiation by location or use.