The Supreme Federal Court (STF), through the Extraordinary Appeal with Aggravation (ARE) 1,294,969, discusses whether there is or not the incidence of the Real Estate Property Transfer Tax (ITBI) on the assignment of rights to purchase and sale real estate property and, if so, when should be collected . The return of the theme to debate shows that the understandings already consolidated at the Court have not yet been definitively pacified.
The discussion began in 2018, when, in view of the assignment of rights to promise to purchase and sale an autonomous unit, the City of São Paulo raised the need to collect the ITBI as a condition for the drafting of the Public Deed for the assignees of rights. The assignees filed a writ of mandamus, which was upheld based on the premise that "the mere assignment of rights, carried out by a deed of purchase and sale, without its necessary registration, does not constitute a generating fact of the ITBI".[1]
The city appealed, but the first instance decision was upheld. An extraordinary appeal was then interposed, tried on 11 February 2021. In the trial, Minister Luiz Fux proposed the following thesis for the purposes of general repercussion: "The event that generates the Real Estate Property Transfer Tax (ITBI) only occurs with the effective transfer of real estate property, which occurs through registration."
At first, therefore, when judging the issue, the Supreme Court reaffirmed the understanding that the generating fact of the ITBI is the transfer of the real estate property, which is only effective with the registration of the title in the real estate registry office. The municipality of São Paulo, however, appealed again through a motion for clarification, claiming that the case refers to the assignment of rights related to the commitment to purchase and sale of the real estate property, while the pacified jurisprudence only refers to deals with the transmission of the real estate property.
The municipality relies on the argument that the assignment of rights in the acquisition of real estate property is a hypothesis of the incidence of the ITBI expressly provided for in Article 156, II, of the Federal Constitution, while the jurisprudence refers to the transmission of the property, and not to the rights related to it.
Indeed, the Constitution recommends that the assignment of rights related to the transmission of real estate property is configured as a fact that generates ITBI. The municipality, therefore, argues that the registration of the title is irrelevant to the incidence of the tax on the rights of the acquisition of real estate property.
The reporting minister Luiz Fux voted to reject the motion, clarifying that the Supreme Court, in a previous decision, analyzed the legal controversy raised by the application of the dominant jurisprudence in such Court. According to the minister, the event that generates the ITBI "is only perfected with the effective transfer of the real estate property, which occurs through registration before the real estate registry office". Three other ministers followed the vote of the reporting minister.
Minister Dias Toffoli, however, pointed out that, in fact, the mentioned precedents, which consolidated the dominant jurisprudence in the Court, are related to inter-living transfer of real estate property or real estate property rights, while the case under discussion refers only to the assignment of rights related to the commitment to purchase and sell the real estate property.
The Minister also noted that the Federal Constitution provides, in item II of Article 156, the collection of ITBI in the assignment of rights related to the transfer of real estate property. He argued, thus, that the fixed thesis does not cover the hypothesis discussed in the present case.
Six other ministers followed the vote of Minister Dias Toffoli, and the Supreme Court, by a majority, accepted the motion for clarification to recognize the existence of constitutional matter and, therefore, its general repercussion, without, however, reaffirm jurisprudence.
Currently the Extraordinary Appeal with Aggravation (ARE) 1,294,969 is pending of judgment on its merits with the reporting minister André Mendonça .
Although so far the decisions on the ITBI were related to the matter if the incidence of the tax should occur only at the registration of the title, it is verified that the Supreme Court is positioning to rediscuss the theme and judge it definitively.
In this way, there are chances that new understandings on the subject shall be consolidated in the courts and that, consequently, there are relevant financial impacts on real estate transactions, even if they only referred to the transmission of rights, and not property.
[1] J.J. J.J. 13th Court of Public Finance. Civil warrant - Extinction of the tax credit, Autos 1008285-73.2018.8.26.0053. Trial date: July 27, 2019. Release date: July 31, 2019.
