STF concludes trial on tax immunity of charitable organizations
The Brazilian Supreme Court (“STF”) has declared unconstitutional a law that establishes conditions for the recognition of charitable organizations social security contributions immunity. According to STF, said conditions can only be set forth by complementary law.
The STF concluded the judgment of the direct action of unconstitutionality (“ADI”) No 2028 on 8 May 2017, when the corresponding decision was published. In said decision, the Justices analyzed the legitimacy of the ordinary law that set conditions for the fruition, by charitable organizations, of the immunity from social security contributions, as provided for in art. 195, paragraph 7, of the Federal Constitution.
Initially, the case was admitted as an allegation of breach of fundamental precept (“ADPF”), because the contested legal provisions (Law No 9,732/1998, art. 1, in the part that amended Law No 8,212/1991, art. 55, III, and added to it paragraphs 3, 4 and 5, as well as arts. 4, 5 and 7) had been revoked. Consequently, the Justices did not deal with Law No 12,101/2009, which revoked the rules on trial and currently defines the requirements and procedures that charitable organizations must observe for obtaining said immunity.
As to the merits of the case, the STF understood the Federal Constitution does not define the concept of “social assistance charitable organization”, which is not equal to the “non-profit institutions of education and social assistance” that are mentioned in the Federal Constitution (art. 150, VI, “c”) for the purpose of immunity from taxes on assets, income or services of. In light of the foregoing, the STF decided that only the “infra-constitutional” law shall impose requirements to be observed by charitable organizations in order to qualify as such and benefit from tax immunity.
Although the Federal Constitution sets forth this matter must be regulated by “law”, without specifying whether ordinary or complementary, the full panel of the STF has decided the matter cannot be subject to sudden legislative changes, which would hinder the continuity of charitable works.
Thus, the STF established that, according to art. 146, II, of the Federal Constitution, only complementary laws can define which conditions and considerations may be required for the recognition of an organization as “social assistance charitable organization”. Ordinary laws may provide on procedural aspects only, such as those related to certification, supervision and administrative control.
Based on such ruling of the STF, charitable organizations may request, either administratively or judicially, the cancellation of its tax debts that have been assessed on the basis of the articles declared unconstitutional.
In addition, such understanding set by STF is an important precedent for the future judgment of ADIs 4480 and 4891, when the Court will analyze the constitutionality of the current ordinary law (Law 12,101/2009) that sets forth the conditions and requirements that health, educational and social assistance charitable organizations must meet for obtaining social security contributions immunity.