The Brazilian Federal Supreme Court (STF) decided unanimously that the revocation of tax benefits granted with a fixed term and under certain conditions must adhere to the constitutional principles of tax law precedence—both the annual precedence (Article 150, III, “b” of the Brazilian Federal Constitution) and the 90-day rule (Article 150, III, “c”). This understanding was established during the judgment of Extraordinary Appeal No. 564.225, filed by the State of Pará against a decision that nullified an ICMS charge (Tax on Circulation of Goods and Services, a type of value-added tax in Brazil) related to the period of March and April 2013, due to the revocation of a state tax benefit.

The law, approved in December 2023, sought to increase revenue by immediately revoking tax incentives such as accelerated depreciation and full deduction of investments. In defense, taxpayers argued that this violated legal certainty, the protection of legitimate expectations, and the federal pact, as many incentives involve federal entities and contracts with fixed terms. Conversely, the State of Pará maintained that the provision should only apply to the creation and increase of taxes, not affecting the revocation or suppression of tax benefits.

However, the Court did not accept these arguments, as the justices highlighted that the abrupt withdrawal of benefits effectively amounts to an increase in the tax burden, thus necessitating compliance with the temporal limitations imposed by the Constitution. The rapporteur, Justice Luís Roberto Barroso, emphasized in his vote that “one cannot frustrate the legitimate expectation of the taxpayer who organized their activity based on a legal framework previously established by the State.”

Consequently, the STF’s stance is seen as an important check on the state’s revenue-driven policies and reaffirms the need to respect constitutional principles, even during fiscal adjustments. However, it should be noted that the STF’s ruling does not eliminate the possibility of revoking tax benefits but conditions their effectiveness on the completion of the precedence period, thereby protecting taxpayers from sudden changes that could affect business predictability.