On April 25, 2013, the Special Panel of the Superior Court of Justice resumed judgment of Special Appeal n. 1,266,318, concerning the impossibility for the taxpayer to lift an arrest performed in a Tax Foreclosure when it adheres to a term-payment program, since there is a legal provision determining that the deposit will be converted into Government’s income (Section 10 of Law 11,941/2009).

The Appeal was filed by an individual against a decision issued by TRF5 and sustains the unconstitutionality of Sections 10 and 11 of Law 11,941/2009.

As mentioned by the Federal Attorney in his oral hearing, although there is no proof of sham in this case, the STJ authorization to lift the arrest would be a precedent for other taxpayers to obtain this lift of arrested property and they may come to breach the term-payment program obligations. Thus, the National Treasury would return to the phase previous to the charge of the tax credit.

Despite the Government’s understanding, Justice Napoleão Nunces Maia Filho voted to grant relief to the Special Appeal under the argument that the matter must be analyzed considering criteria of isonomy, freedom and equality in market competition.

According to the Reporting Justice, considering the circumstance in which two companies – one with a tax foreclosure and the other one without –adhered to the term-payment program, the one with arrested goods would be under a more harmful circumstance. Thus, “if the company that presented a guarantee continued with its property arrested even after adhering to the term-payment program, it would be under a less advantageous competition level than the other one”.

The sham issue was also dismissed by the Justice. The Government’s argument that a taxpayer with bad faith could use the term-payment program only to lift the arrest cannot be fully accepted, since there are term-payment situations without guarantee.

The judgment was interrupted when Justice Sidnei Beneti requested to see the records and there is no estimate for it to continue.

(Special Appeal n. 1,266,318).