Until the publication of Supplementary Law No. 118/05, federal, state and municipal governments had five years, counting from the date of the definitive creation of tax debts, to order appropriate tax executions and to serve the process on taxpayers. In the event that the five-year deadline passed before the adjudication of the tax execution and service of a summons on the taxpayer, the statute of limitations would function to extinguish the debt and extinguish the right of Brazil’s tax authorities to file a tax execution to collect the tax.
With the changes introduced by Supplementary Law No. 118/05, the statute of limitations was deemed to be tolled on the date which the court orders that the taxpayer be served with a summons, not the date on which the summons is deemed effective (for example, on proper service of the summons on the taxpayer). This change has clearly brought tangible benefits to federal, state and municipal tax authorities since it waived the effective date of the summons as the key date for purposes of the statute of limitations in favour of the date service of the summons is ordered by the court.
As if the above described advantages were not sufficient, however, the Judiciary has taken an even more aggressive stance with regard to the statute of limitations by ruling that, not only is the statute of limitations tolled by the court’s issuance of a summons, it is also suspended where the order to issue a summons does not occur because of simple judicial delay.
The position expressed in the decisions of the Judiciary described above are based on the application of Decision No. 106 of the Superior Court of Justice, which has as its origin an interpretation of paragraph 1 of article 219 of the Brazilian Code of Civil Procedure, which is an “ordinary law” that is not to be confused with a “supplemental law”, which has greater importance in the Brazilian legal system.
Decision No. 106 of the Superior Court of Justice provides:
“Once the action is proposed within the period set forth for its exercise, the delay in issuing a summons, for reasons inherent to the mechanisms of justice, does not justify a defense on the basis of the statute of limitations or lapse of right.”
There is an express provision in the Brazilian Federal Constitution which provides that only a supplemental law may establish general rules applicable to tax legislation and, in particular, to statutes of limitation.
Thus, considering the that neither Decision No. 106 nor Paragraph 1 of Article 219 of the Brazilian Code of Civil Procedure (which formed the basis for Decision No. 106) are in the nature of a supplemental law, we believe there is a considerable chance that the Supreme Federal Court will rule that the statute of limitations may not be tolled merely because the court failed to order service of a summons due to judicial delay, the use of Decision No. 106 in such circumstances being unconstitutional.
João Marcos Colussi, Mattos Filho, jmarcos@mattosfilho.com.br
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