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Federal Supreme Court Finally Decided on the Possibility of Breach of Bank Secrecy by the Brazilian Federal Revenue

Tax
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2/26/2016 12:00 AM Demarest News

 

FEDERAL SUPREME COURT FINALLY DECIDED 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 might 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.

As we mentioned in our last newsletter, in plenary session held on 2/18/16, the Federal Supreme Court started to hear such Direct Actions (that received nos. 2390, 2386, 2397 and 2859) and the Extraordinary Appeal chosen as representing the controversy (that received no. 601314).

On that occasion, six of the 11 Justices 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 taxpayers' banking information, regardless of any Court order.

Justice Marco Aurélio also cast his vote, but he had a dissenting opinion. 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.

In session held on 2/24/16, the Federal Supreme Court completed the decision with the votes of Justices Gilmar Mendes, Ricardo Lewandowski and Celso de Mello. In general terms, the first two Justices followed the votes that admit the access to the information, whereas Justice Celso de Melo followed the dissenting opinion.

When the decision was announced, the Justices pointed out that, for the Brazilian Federal Revenue to have access to taxpayers' banking information regardless of any Court authorization, the following requisites are absolutely necessary for the Federal Government, the States and Municipalities:

(i)      Relationship between the subject matters of the request for breach of secrecy and the inspection;

(ii)     Prior notification of the taxpayer on the request;

(iii)    Submission of the request to a superior in rank;

(iv)    Development of electronic information safety systems that do not allow the leakage of information; and

(v)     Implementation of systems for identification and correction of deviations.

 

Our Brasília team specializes in the monitoring of proceedings in the Higher Courts and is at your service to give you further explanations or take the necessary measures in regard to this matter.

Demarest Advogados


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