Zanin accepts government request and suspends payroll tax exemption

Federal Supreme Court (STF) minister Cristiano Zanin recently granted an injunction to suspend the exemption from payroll taxes in 17 sectors of the economy and certain municipalities.

The minister’s decision was motivated by an action filed this Wednesday (24) by the Attorney General’s Office (AGU).

In the decision, the minister understood that the approval of the exemption by Congress did not indicate the financial impact on public accounts.

“The factual framework presented, including the issuance of subsequent provisional measures with the aim of reducing the imbalance in public accounts, indicates, in this preliminary judgment, that there is an urgency to avoid a true fiscal imbalance of billion-dollar proportions that will be difficult to resolve if control comes to be done only at the end of the judgment on the merits”, explained Zanin.

The injunction issued by the minister must be endorsed by the virtual plenary of the Court. The session will start at midnight and run until May 6th.

In the action filed with the STF, the AGU maintained that the exemption was extended until 2027 by Congress without establishing the financial impact of the tax exemption. The petition was signed by President Luiz Inácio Lula da Silva and the Attorney General of the Union (AGU), Jorge Messias.

The action also contested the decision of the president of the Senate, Rodrigo Pacheco (PSD-MG), which invalidated the section of Provisional Measure (MP) 1.202/2023. The MP overturned social security exemptions for small and medium-sized municipalities.

Issued at the end of last year by the federal government, the measure reestablished the rate of contributions to the National Insurance Institute (INSS) from 8% to 20% by municipalities with up to 156 thousand inhabitants.

The payroll tax exemption for 17 sectors and municipalities with up to 156 thousand inhabitants was approved by Congress, however, the bill was vetoed by President Lula. Then Congress overturned the veto.