STF Finalises Judgment on Non-Incidence of ITD on Gifts and Legacies

When the virtual judgment on the merits of RE 851.108/SP was concluded on February 26, 2021, the Federal Supreme Court prohibited the States and the Federal District from levying the Transfer Causa Mortis and Gift Tax (ITD) on donations or legacies from abroad without the enactment of a complementary law by the National Congress.

In accordance with its routine practice in cases with a certain tax impact, the Supreme Court, on that occasion, ended up moderating the effects of the judgment, with a view to reducing loss to the public coffers.

Thus, the decision became effective ex nunc, i.e. from the date of the judgment onwards, and April 20, 2021 was established as the reference date – the change did not affect lawsuits filed before this date, thereby safeguarding the rights of taxpayers who had already taken the matter to court.

Recently, in a virtual session that ended on April 8, 2022, the STF entered judgment in the second Motion for Clarification filed by the State of São Paulo against the decision on the merits rendered on February 26, 2021.

This time, the State of São Paulo had raised a possible contradiction in the Court’s decisions based on the above-mentioned modification. As expected, the STF decided to dismiss the appeal, bringing the issue to a close.

Note that on March 18, 2022, the Supreme Court had already reaffirmed its decision that ITD cannot be levied on donations and legacies from abroad when judging Direct Actions of Unconstitutionality (ADIs) filed by the Attorney General’s Office against provisions of the state laws of Paraná (ADI 6. 818), Tocantins (ADI 6.820), Santa Catarina (ADI 6.823), Mato Grosso do Sul (ADI 6.840) and the Federal District (ADI 6.833).

On all these occasions, the STF ratified its understanding that the States and the Federal District have no legislative competence to levy ITD on assets received from foreign residents, in view of the need for regulation of the matter by a federal supplementary law.

Accordingly, until a federal complementary law is enacted, ITD is not due where (1) the donor or deceased person is domiciled or resident abroad, (2) the assets inherited are located abroad, or (3) the probate proceedings take place outside Brazil.

Thus, as regards real property in Brazil, ITD is charged by the State where the property is located, in the case of transfer both by donation and inheritance.

In the case of personal (movable) property, ITD is charged by the State where the donor is domiciled or where the probate proceedings take place.

Finally, in the case of gifts originating from abroad, ITD will only be due on enactment by the Federal Government of the complementary law referred to above.

The same applies to transfers by way of inheritance where (1) the deceased was resident abroad, (2) the assets inherited are located abroad, or (3) the probate proceedings are conducted outside Brazil.

Thiago Peluso Rossi

Caio Magalhães Chaves Barbosa

Setting Aside a Court Judgment

Opinions, or judgments, are decisions made by judges in court cases. Many court decisions are made orally at the time of the hearing. Others may be reserved and issued, usually in writing, at a later date. an issue of legal significance.

The essence of civil proceedings is for the judgment creditor to enjoy the fruits of his Judgment. This may be achieved by the judgment creditor executing the Judgment by the attachment and sale of the moveable or immovable property of the judgment debtor, attachment of funds belonging to the judgment debtor in the possession of a third party under the garnishee proceedings or committal of the judgment debtor to prison for refusal to settle the judgment debt under the judgment summons proceedings.

However the following are the grounds upon which a Nigerian Court will set aside execution of a Judgment.

(i) Judgment against a person other than the judgment debtor

There are instances where a judgment creditor who is desperate to obtain payment of the judgment debt, attaches the movable property of a third party in the premises of the judgment debtor.

Upon the application of the third party with proof that the property belongs to him and not the judgment debtor, the Court would set aside the execution of the Judgment.

(ii) Judgment was executed, was never a party to the suit

A judgment creditor cannot legally execute a Judgment against a person who was not a party to the suit upon which he obtained Judgment. This is so even if the person against whom the Judgment was executed is the judgment debtor’s successor-in-title.

For instance, if a defendant dies before Judgment is delivered, the judgment creditor ought to bring an application to substitute the defendant’s name with that of his successor-in-title and serve the successor-in-title with all the processes in the suit.

If the judgment creditor fails do so and the Judgment is delivered against the defendant, the judgment creditor cannot sustain an execution against the defendant’s successor in title. This is because the successor-in-title was not a party to the suit. In law, the defendant and his successor-in-title are distinct and different persons.

(iii) Lack of service of the processes on the judgment debtor

If the judgment creditor failed to effect service of the processes in the suit on the judgment debtor in line with the provisions of the relevant statutes on service of processes, the Court would set aside the execution of the Judgment against the judgment debtor.

This is because service of processes on the judgment debtor goes to the root of the suit and affects the jurisdiction of the Court to validly enter Judgment against the judgment debtor.

Lack of service is a clear breach of the judgment debtor’s fundamental right to fair hearing and makes the proceedings conducted a nullity and of no legal effect whatsoever.

(iv) Lack of jurisdiction of the Court who delivered the Judgment

Jurisdiction of Court is a threshold issue. If the Court who delivered the Judgment which the judgment creditor executed against the judgment debtor had no jurisdiction in the first place over the subject matter of the suit or exceeded its statutory jurisdiction, the judgment debtor may apply to set aside the execution of the Judgment.

(v) Execution of a Judgment outside the stipulated statutory period

Order IV Rules 8 and of the Judgment Enforcement Rules provides that a Judgment shall be executed against the property of a judgment debtor within 6 years and against the person of the judgment debtor within 2 years from the date in which the Judgment was delivered, failing which the judgment creditor must file an exparté application for leave of Court to execute the Judgment outside the stipulated statutory period.

If a judgment creditor, without leave of court, execute a Judgment outside the stipulated statutory period, the judgment debtor may apply to the Court to set aside the execution of the Judgment.