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  • STJ to Define Financial Retention Limits in Real Estate Contract Terminations

    STJ to Define Financial Retention Limits in Real Estate Contract Terminations

    The Second Section of the Superior Tribunal de Justiça (STJ, Brazil’s Superior Court of Justice) stayed pending lawsuits and will decide, under the repetitive appeals procedure, the dispute surrounding financial retention limits when real estate purchase and sale agreements are terminated. The decision, reported by Justice Ricardo Villas Bôas Cueva, applies to cases where the buyer initiates the cancellation due to buyer fault.

    The Legal Issues Under Review

    The questions were logged in the STJ database and divided into two distinct topics for review by the court:

    • Topic 1,465: Addresses the percentage and calculation basis of amounts sellers may withhold under contracts signed before Federal Law No. 13,786/2018 took effect, commonly known as the Real Estate Termination Law (Lei do Distrato).
    • Topic 1,464: Covers the retention limit specifically for purchase and sale agreements involving unbuilt land (lots or land plots) entered into after the Real Estate Termination Law took effect.

    Special Appeals 2,255,394, 2,255,370, 2,255,054, and 2,255,393 were selected for this binding review. The substantial volume of cases motivated the measure. According to the Precedents, Case Law, and Class Actions Management Commission (Cogepac), the Second Section panels have already issued 53 appellate rulings and 692 individual judicial decisions on Topic 1,464, along with 133 appellate rulings and 3,615 individual decisions on Topic 1,465.

    Divergence Between STJ Panels

    Selecting these appeals aims to resolve conflicting legal interpretations between the court’s Third and Fourth Panels regarding the applicable percentages.

    For the Third Panel, in contracts executed after the statute (Topic 1,464), the Brazilian Consumer Defense Code (CDC) must take precedence over the Real Estate Termination Law. Consequently, retention applies solely to installments actually paid, generally capped at 25% of the total amount settled, except when compensation for property use applies. For contracts signed prior to the statute (Topic 1,465), this panel permits retention between 10% and 25% of paid amounts, leaving lower courts to set the appropriate percentage on a case-by-case basis.

    Conversely, the Fourth Panel holds that, for contracts executed after the statute (Topic 1,464), the provisions of the Real Estate Termination Law do not conflict with the CDC. Under this rationale, withholding up to 10% of the updated total contract value is permissible, pursuant to Article 32-A of Federal Law No. 6,766/1979. For prior contracts (Topic 1,465), the standard rule applied is a 25% retention of amounts paid, intended to cover general administrative expenses incurred by the seller and deter unilateral contract termination.

    Practical Impacts and Legal Certainty

    With the selection of these appeals, all pending cases addressing the same subject matter that have filed special appeals or interlocutory appeals against the denial of special appeals before second-instance courts or the STJ are stayed. The Brazilian Civil Procedure Code governs this sample-based adjudication framework in Articles 1,036 and following.

    Settling this issue will enable uniform application of a single legal standard across thousands of lawsuits, streamlining repetitive litigation throughout the Brazilian court system, saving judicial resources, and delivering greater predictability for the real estate market.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • CMN Resolution Restricts Acquisition of Judicial Claims

    CMN Resolution Restricts Acquisition of Judicial Claims

    The CMN (Brazil’s National Monetary Council) has approved a new resolution that significantly alters how FIDCs (Credit Rights Investment Funds) acquire judicial and arbitral claims. Approved on September 24, 2024, and effective as of October 13 of the same year, the rule aims to mitigate investor exposure to risks tied to ongoing legal disputes.

    What changes in the acquisition of credit rights

    The main directive of the new regulation prohibits direct or indirect investments in these assets unless the claims exhibit definitive liquidity, certainty, and enforceability. The central objective of the CMN is to separate legal risk—meaning the uncertainty of winning the lawsuit—from credit risk, which involves the debtor’s ability to pay.

    In practice, the requirements vary depending on the nature of the dispute:

    • Judicial claims: The claim must now reach a final, unappealable judgment (known in Brazil as trânsito em julgado), alongside the definitive determination of the amount and enforceability of the debt.
    • Arbitral claims: Funds must wait for the expiration of the deadline to challenge the arbitral award or for the conclusion of any annulment lawsuit.

    Prior to the resolution, FIDCs could invest in rights whose value or collection still depended on the outcome of disputes. Now, funds must wait for the definitive consolidation of the claim before making new investments.

    Context of investigations and legal certainty

    The regulatory shift occurs against a backdrop of investigations into credit operations and fund structures. One episode preceding the measure involved Banco Master, in which the CNJ (Brazil’s National Council of Justice) ordered the cancellation of 16 court-ordered debt payments (precatórios) valued at R$ 4.7 billion. These titles had been issued before final, unappealable judgments had occurred in the lawsuits.

    Another relevant case is Operation Crédito Oculto, an offshoot of Operation Carbono Oculto. Authorities identified a transaction of approximately R$ 370 million in credit rights involving an ethanol mill. According to the Receita Federal (Brazil’s Federal Revenue Service), part of the resources used to acquire FIDC quotas originated from funds controlled by the same group under investigation. The structure allegedly hindered the identification of the beneficial owners, raising evidence of money laundering and asset concealment.

    Impacts on existing portfolios and new requirements

    For funds that already hold claims in their portfolios that do not meet the new criteria, the regulation does not mandate an immediate sale of the assets, but it imposes strict monitoring and transparency rules. Starting January 4, 2025, these funds must:

    • Adopt valuation methodologies subject to independent verification;
    • Revalue assets whenever material events occur;
    • Conduct independent audits;
    • Disclose updated portfolio information to quota holders.

    While the measure brings greater clarity regarding investor risks, it may increase fund management and monitoring costs. It is important to emphasize that even after a final judicial resolution, collection is not guaranteed, as the credit risk linked to the debtor’s solvency persists.

    Structural alternatives in the financial market

    Faced with these restrictions and a tight adaptation timeline, market players are already evaluating new paths. The CEO of the Bloxs platform, Felipe Souto, points out that while the measure is justified by market credibility issues, prohibiting new acquisitions by FIDCs was an excessive response. In his view, stricter controls, such as valuation reports and independent audits, might have been sufficient.

    Securitization stands out as an alternative for structuring these operations. The issuance of securitized debentures, for example, can enable fundraising based on credit rights that are no longer eligible for FIDCs, provided applicable regulations are observed. The change, therefore, does not eliminate investments in judicial claims, but rather shifts the instruments used, risk allocation, and transaction cost dynamics.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • STF Excludes Presumed ICMS Credits from PIS/Cofins Tax Base

    STF Excludes Presumed ICMS Credits from PIS/Cofins Tax Base

    The STF (Brazil’s Supreme Federal Court) ruled to exclude presumed ICMS (state VAT) tax credits from the calculation base of federal contributions PIS and Cofins.

    The impact of general repercussion

    The decision was rendered under the general repercussion framework (a binding precedent mechanism). In practice, this means the understanding established by the Supreme Court must be applied uniformly throughout the judicial system.

    Following the STF’s determination, the ruling will directly impact the adjudication of similar cases across Brazilian courts. Furthermore, the established precedent now guides tax authorities nationwide.

    Relevance for businesses

    For the productive sector, particularly in industry and commerce, excluding presumed ICMS credits from the PIS and Cofins tax base represents a significant milestone in tax assessment. Binding tax authorities and courts to this decision ensures greater uniformity and predictability for corporate operations in Brazil.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • STJ to Define Retention Limits on Real Estate Contract Terminations

    STJ to Define Retention Limits on Real Estate Contract Terminations

    The Superior Court of Justice (STJ, Brazil’s highest appellate court for non-constitutional matters) will define the limits on amounts retained when real estate purchase agreements are terminated. The case is closely monitored by the real estate industry, as the upcoming decision will directly affect transaction structuring and financial predictability for companies and investors.

    The concept of retention upon termination

    In the real estate sector, contract termination occurs when a property purchase agreement is cancelled before its final completion. In these scenarios, market practice and legal rules allow the seller to retain a portion of the amounts already paid by the buyer.

    This retention compensates for administrative, operational, and commercialization costs incurred by the developer during the transaction. Defining clear limits will establish a unified benchmark for these deductions, standardizing calculations in contract cancellation disputes.

    Relevance for investors and companies

    For executives, founders, and foreign investors deploying capital in the Brazilian real estate sector, clear guidelines on contract termination are essential. Establishing a definitive retention ceiling at the STJ will help to:

    • Mitigate operational and financial risks;
    • Reduce the volume of disputes concerning fund reimbursements;
    • Increase predictability in corporate cash flow provisioning.

    With clear parameters, industry players can structure agreements that align with the court’s stance, promoting legal certainty in the business environment and supporting investment.

    Practical considerations

    The upcoming ruling by the STJ requires market participants to closely follow the final parameters set by the court. Once defined, real estate businesses will have a clear framework to adapt commercial policies and align operations with the superior court’s standards.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • STJ Elevates Terms of Use to Instruments of Contractual Security

    STJ Elevates Terms of Use to Instruments of Contractual Security

    The STJ (Brazil’s Superior Court of Justice) has consolidated the understanding that terms of use function as a genuine instrument of contractual security. This guidance is highly relevant for digital platforms, as well as foreign companies and investors operating in or planning to enter the Brazilian online market.

    The role of terms of use

    In the digital environment, terms of use are the set of rules defining how a service, application, or platform must be used by the public. They establish the rights and obligations of each party. By elevating this document to the status of a contractual security instrument, the STJ formally acknowledges that these provisions are not merely bureaucratic formalities or generic text.

    In practice, this means that terms of use hold legitimate legal force to organize commercial relations. They protect the service provider’s operations while ensuring that users clearly understand the limits and conditions of the tool they are utilizing.

    Predictability for businesses and digital platforms

    For founders, executives, and managers, the court’s position underscores the necessity of transparency. The STJ’s recognition shows that a clear and accessible document is vital to mitigate operational risks and objectively define liability parameters.

    When a digital platform operates with well-defined terms of use, it fosters a more predictable operating environment. This predictability is particularly critical in foreign direct investment scenarios, where legal certainty is a decisive factor for international business expansion in Brazil.

    Conclusion

    The STJ’s ruling emphasizes that drafting and updating terms of use must be approached as foundational steps when structuring any digital business model. The document is no longer treated as a mere technical detail, but as a core pillar of contractual security between platforms and their users.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • CARF Upholds Assessment of IRPJ and CSLL on Foreign Profits

    The Administrative Council of Tax Appeals (CARF, Brazil’s administrative tax court) recently issued a relevant decision for multinational companies with operations in South America. The administrative tribunal upheld the assessment of Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) in a case concerning the taxation of profits earned abroad.

    The dispute over foreign profits

    The core discussion centered on the tax base for Brazilian federal taxes. Brazilian companies with controlled subsidiaries—entities in which they hold decision-making control—outside Brazil frequently face scrutiny regarding how profits from foreign operations must be treated domestically.

    In the case reviewed by CARF, the multinational Whirlpool had excluded profits generated by its controlled subsidiaries in Argentina from the calculation base of IRPJ and CSLL paid in Brazil.

    The council’s ruling

    Upon reviewing the matter, CARF ruled to uphold the tax assessment. The administrative interpretation established that excluding earnings generated by Argentine subsidiaries from the Brazilian tax base was not permissible in this specific scenario, thereby sustaining the tax assessment against the company.

    Corporate decisions involving cross-border investments require careful attention to the consolidation of global financial results. The tax treatment of profits earned by foreign subsidiaries remains a matter under continuous review by Brazilian tax authorities.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • TST invalidates clause on weekly rest after the seventh consecutive day

    TST invalidates clause on weekly rest after the seventh consecutive day

    The Superior Labor Court (TST, Brazil’s highest labor court) issued a decision invalidating a clause that authorized weekly rest after the seventh consecutive day of work.

    The rule rejected by the court

    The provision invalidated by the TST established flexibility in work shift schedules. Under the rule, rest could occur on the sixth or eighth consecutive day of professional activity, operating on an alternating basis.

    The condition set out in the clause to permit this arrangement was the guarantee that the employee received two rest periods every 14-day cycle. However, the court found the practice invalid, rejecting the postponement of rest to the eighth day.

    Impacts on shift schedule management

    The invalidation of this clause directly impacts how companies structure their work shifts, particularly in sectors operating continuously or on weekends. The decision indicates that granting two days off within a 14-day period is not sufficient to validate working seven consecutive days without proper rest.

    Consequently, organizations must strictly observe the frequency of mandatory rest days to prevent uninterrupted work beyond the limits accepted by labor courts, aligning their operational routines with the parameters established by the court.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • STF Resumes Ruling on ITBI Tax Immunity for Real Estate Companies

    The STF (Brazil’s Supreme Federal Court) resumed the judgment addressing the tax immunity of ITBI (the municipal real estate transfer tax) upon the contribution of real estate to the share capital of real estate companies.

    Understanding the Concepts

    ITBI is a municipal tax levied on real estate transfers. Capital contribution, in turn, occurs when partners or shareholders transfer assets—such as real property—to form or increase a company’s equity. The central discussion at the STF involves the application of tax immunity specifically to companies operating in the real estate market.

    Impact on the Real Estate Market

    The resumption of this trial is closely monitored by investors and industry executives. The Court’s final definition regarding the collection or immunity of ITBI on these transfers directly affects the costs of structuring new transactions, asset organization, and corporate planning for real estate companies.

    The outcome of the STF vote is awaited to establish greater legal certainty regarding the taxation of such transactions in Brazil.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • STF Excludes Deemed ICMS Tax Credits from PIS and Cofins Base

    STF Excludes Deemed ICMS Tax Credits from PIS and Cofins Base

    The Supreme Federal Court (STF, Brazil’s highest constitutional court) ruled that deemed tax credits of the State Value-Added Tax (ICMS) should not be included in the calculation base of PIS and Cofins federal social contributions. The ruling marks an important milestone for the Brazilian corporate tax landscape, especially for the industrial sector.

    What are deemed ICMS tax credits?

    To grasp the impact of the decision, it is essential to understand the concepts involved. ICMS is a state-level tax levied on the circulation of goods and transport and communication services. In many instances, Brazilian states grant deemed tax credits (créditos presumidos) as a fiscal incentive, reducing the net tax payable by companies to stimulate regional economic activity.

    On the other hand, PIS and Cofins are federal contributions calculated on corporate gross revenue or turnover.

    The Supreme Federal Court’s decision

    The core dispute centered on whether these deemed ICMS credits, granted by state governments, should be classified as corporate revenue or turnover and, consequently, taxed by the Federal Government under PIS and Cofins.

    By excluding deemed ICMS credits from the tax base of these federal contributions, the STF established that these state incentives do not constitute taxable revenue for PIS and Cofins purposes. In practice, federal taxation on these amounts would undermine the fiscal incentive granted by the states.

    Impact on businesses

    This exclusion relieves the tax burden on companies that benefit from these state incentives. By preventing the Federal Government from taxing deemed credits, the decision preserves the intended purpose of the original tax benefit, providing greater legal certainty for taxpayers and investment operations in Brazil.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.

  • STJ Defines Legal Standing in Eviction Claims Arising from Successive Sales

    STJ Defines Legal Standing in Eviction Claims Arising from Successive Sales

    The Superior Court of Justice (STJ, Brazil’s highest appellate court for non-constitutional matters) issued an important ruling for transaction security, defining who holds legal standing to seek indemnification for eviction in scenarios involving successive sales.

    What eviction is and how it affects business

    In corporate and real estate transactions, eviction—the loss of acquired property due to a prior third-party right recognized by law—is a fundamental concept. It occurs when a buyer loses possession or ownership of an asset following a judicial decision or administrative act. This usually happens because of a pre-existing legal issue that predates the purchase, such as an attachment or an ownership dispute unknown to the ultimate buyer.

    The challenge of successive sales

    Complexity increases when multiple successive transactions take place. Along a chain of deals, real estate or an asset may change hands several times before the original legal defect surfaces, causing the final purchaser to lose the asset. In such scenarios, the primary legal question is determining whom the aggrieved buyer may pursue for financial compensation and who holds the procedural standing to participate in that lawsuit.

    The STJ ruling

    By establishing who holds legal standing to seek damages for eviction within these transmission chains, the STJ provides a clear benchmark for the market. This definition helps structure civil liability among all parties involved in successive transactions. For investors, companies, and buyers, the court’s precedent offers greater predictability, reducing uncertainty around how past transactional risks are legally allocated.

    This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.