Skip Ribbon Commands
Skip to main content
Sign In
Navigate Up

Federal Supreme Court - Judgment on the Possibility of Breach of Bank Secrecy by the Brazilian Federal Revenue

Tax
Elapsed=00:00:00.0876595

2/22/2016 12:00 AM Demarest News

​​

FEDERAL SUPREME COURT - JUDGMENT ON THE POSSIBILITY OF BREACH OF BANK SECRECY BY THE BRAZILIAN FEDERAL REVENUE ​


Supplementary Law no. 105/2001 was enacted in January 2001. It established in its articles 5 and 6 as follows:

"Art. 5. The Executive will provide for, including in regard to periodicity and amount limits, the criteria under which financial institutions will inform the federal tax administration of the financial transactions conducted by the users of their services."​

"Art. 6. The tax authorities and agents of the Federal Government, States, Federal District and Municipalities will only be permitted to examine documents, books and records of financial institutions, including those related to deposit accounts and financial investments, in case of a pending administrative proceeding or tax procedure in course and such examinations are considered indispensable by the competent administrative authority."

 

At the time the Law was enacted, it caused a strong reaction among taxpayers, because the delivery of their information to the Federal Revenue without any Court order could represent a breach of bank secrecy, which is guaranteed by the Brazilian Constitution.

Several were the Individual Actions brought to discuss the matter and the Federal Supreme Court also received Actions for Declaration of Unconstitutionality to settle the matter based on the so-called concentrated control of constitutionality, whose decision affects all taxpayers, either individuals or legal entities.

In plenary session held on 2/18/16, the Federal Supreme Court started to try such Direct Actions (that received nos. 2390, 2386, 2397 and 2859) and the Extraordinary Appeal chosen as representing the controversy (that received no. 601314).

Six of the 11 Justices have already cast their votes (Justices Edson Fachin, Luis Roberto Barroso, Dias Toffoli, Teori Zavascki, Rosa Weber and Carmen Lúcia) for the Brazilian Federal Revenue's access to the banking information of taxpayers, regardless of any Court order. The sole requirement for that is the existence of a prior administrative proceeding brought to that end.

To those Justices, the tax transparency is currently adopted by most countries, as it is the case of the FATCA (Foreign Account Tax Compliance Act), which imports rules from the US Government that allow the Brazilian Government to receive immediate information from the US IRS on financial investments made by Brazilians in that country. In addition, to those Justices, the supply of banking information to the Tax Administration does not entail a breach of bank secrecy, but represents the mere transfer of this responsibility to the Brazilian Federal Revenue agents.

Justice Marco Aurélio also cast his vote, but he diverged from the others. To him, the Brazilian Federal Revenue acts as a party in the procedure of levying and collecting taxes and, for this reason, it could not have access to that information without a specific Court order to that end.

Although there is already a majority opinion, the trial will be resumed next Wednesday (2/24/16) with the votes of Justices Luiz Fux, Gilmar Mendes, Celso de Mello and Ricardo Lewandowski.

Our firm relies on a team in Brasília specializing in monitoring proceedings in the Brazilian Higher Courts and that will closely monitor the outcome of the trials mentioned in this newsletter.

We will be pleased to provide you with further details or take the required measures in regard to the matter in question.

Demarest Advogados


Related Publications

Sign up to receive newsletter

Skip Navigation Linksdemarestnews-julgamentosobrepossibilidadedequebradesigilobancariopelareceitafederal