What is a qualified fine?
The qualified fine is a penalty resulting from tax evasion, fraud or collusion, levied on the total or difference of unpaid, uncollected, undeclared or inaccurately declared tax, the purpose of which is to curb the practice of illicit conduct by the taxpayer.
The main reasons for its application
Taxevasion: action or omission aimed at preventing or delaying the tax authorities’ knowledge of the occurrence of the triggering event of a main tax obligation (taxes or fees, for example), its nature, material circumstances or the taxpayer’s personal circumstances, which may affect compliance with the main tax obligation.
Fraud: an action or omission aimed at preventing or delaying the occurrence of the taxable event of the main tax obligation, or at excluding or modifying its essential characteristics, so as to reduce the amount of tax due in order to avoid or postpone its payment.
Collusion: intentional action or arrangement between two or more natural or legal persons, aimed at any of the effects of the practices of evasion or fraud.
Examples of these practices are: false declarations or omission of information in tax documents, alterations to invoices for operations with the aim of defrauding the tax authorities, alteration of expenses with the aim of reducing taxes or even the gathering together of companies in a particular field/market with the aim of harming or injuring third parties.
Current scenario vs. judgment by the STF
Over the years, the controversy over the constitutionality of the qualified fine has been the subject of intense debate in the Judiciary. The principle of non-confiscation, which exists in the Federal Constitution, has been invoked on several occasions when penalties are applied which sometimes exceed the amount of tax owed by the taxpayer.
In 2015, the STF, recognizing the relevance and complexity of the issue, decided on the General Repercussion of Theme No. 863 (whose decision will extend to all cases discussing this issue), with the aim of unifying the understanding on the criteria for applying the qualified fine. In short, the discussion aims to verify the reasonableness of imposing a fine of 150% on unpaid tax or its undeclared difference.
However, Law No. 14.689/2023 went ahead of the STF and brought important changes to the legal scenario by modifying §1 of article 44 of Law No. 9.430/1996, reducing the amount of the qualified fine by 1/3 and ensuring the retroactivity of the most beneficial legislation.
This means that, with the new wording, in cases of tax evasion, fraud or collusion, the penalty has been reduced from 150% to 100% of the assessed tax credit. As a result, any amounts in excess of this percentage will be canceled.
With regard to repeat offenses, i.e. when a new practice of tax evasion, fraud or collusion is proven within two years, the fine will be 150%.
In the judgment of the paradigm extraordinary appeal (RE No. 736.090), STF Justice Dias Toffoli applied the new wording of the aforementioned law to the issue and limited the fine to 100% of the tax amount.
In his vote, he also argued that the decision should only take effect from the date of the judgment on the merits of the case, which would benefit the federal entities, since they would not have to return the amounts in excess of 100% of the tax already paid by taxpayers, with the exception of lawsuits and administrative proceedings in progress up to the date of publication of the decision on the merits.
So far, the vote is in favor of reducing the penalty to 100%, with 2 votes in favor (Justices Dias Toffoli and Alexandre de Moraes), however, with Justice Flávio Dino’s request to highlight the case, the score will be reset in the in-person session, restarting its count.
We will continue to follow the developments of the trial. If you have any questions, our tax team is available for clarification and guidance.
