Photo: Poder360.
Brazil’s Supreme Federal Court ruled on Oct. 15 that the Funrural contribution charged to individual rural employers on gross sales revenue was unconstitutional for periods before Jan. 1, 2018. The same conclusion applies to the subrogation rule that required companies buying rural products to withhold and pay the contribution on behalf of producers. The decision concluded the court’s review of Direct Action of Unconstitutionality 4,395.
The court also held that the framework created by Law 13,606 of 2018 is constitutional. From that date, the law provided a basis for calculating the rural employer’s social-security contribution on gross sales revenue, in place of payroll, and for requiring buyers to collect it. The STF’s decision therefore draws a date boundary; it does not invalidate the later statutory system.
Justice Dias Toffoli’s intermediate position formed the majority. The STF said the older legislation had not set out all elements needed for collection and that the transfer of payment responsibility to purchasing companies could not be justified by rules for another category of contributor. The case was brought by the Brazilian Association of Meatpacking Companies. The litigation had been pending for years, and related cases had been nationally suspended while the court determined the applicable rules.
The ruling resolves the constitutional question for the periods at issue, but it does not by itself specify the outcome of every individual tax dispute or refund claim. Those proceedings will have to apply the decision to their own facts and procedural status. The governing date in the court’s ruling is Jan. 1, 2018, when the newer statute took effect.