Taxation and Budget

Title VI Taxation and Budget

Chapter I National Tributary System

Section I General Principles

Article 145: Taxation

The Republic, the States, the Federal District, and the Municipalities may institute the following tributes:
  1. taxes;
  2. fees, by virtue of the exercise of police power or for the actual or potential use of specific and divisible public services rendered to taxpayers or made available to them.
  3. assessments, by virtue of public works.
1. Whenever possible, taxes shall be personal and graded according to the economic capacity of the taxpayer, and the tax administration may, especially to make these objectives effective and respecting individual rights and the terms of the law, identify the property, income, and economic activities of the taxpayer.

2. Fees may not have the assessment basis reserved for taxes.

Article 146: Supplemental Law on Taxes

A supplemental law shall:
  1. deal with conflicts of taxing power among the Republic, the States, the Federal District, and the Municipalities;
  2. regulate the constitutional limits to taxing power;
  3. establish general rules for tax legislation, particularly regarding:
  1. the definition of tributes and their kinds, and, as regards the taxes specified in this Constitution, the definition of the respective taxable events, assessment bases, and taxpayers;
  2. tax liability, assessment, credit, statute of limitations, and laches;
  3. adequate tax treatment for the cooperative acts performed by cooperative entities.
Article 147: Taxation in Territories

In a Federal Territory, state taxes are within the taxing power of the Republic and, if the Territory is not divided into Municipalities, also municipal taxes; municipal taxes are within the taxing power of the Federal District.

Article 148: Compulsory Loans

The Republic may, by means of a supplemental law, institute compulsory loans:
  1. to defray extraordinary expenses resulting from public calamity, foreign war or imminence thereof;
  2. in the event of a public investment that is urgent or of relevant national interest, with due regard for the provisions of Article 150 III (b).
1. Applications of the funds derived from a compulsory loan shall be linked to the expense that justified the institution thereof.

Article 149: Social and Economic Taxes

0. It is exclusively incumbent upon the Republic to institute social contributions, contributions regarding intervention in the economic domain, and contributions in the interest of the professional or economic categories, as an instrument of activity in the respective areas, with due regard for the provisions of Articles 146 III and 150 I and III, and without prejudice to the provisions of Article 195 (6), for the contributions mentioned in the provision.

1. The States, the Federal District, and the Municipalities may institute a contribution payable by their servants to fund a social assistance and security system to their benefit.

Section II Limitations to Taxing Powers

Article 150: Main Limits

0. Without prejudice to any other guarantees ensured to the taxpayer, it is forbidden for the Republic, the States, the Federal District, and the Municipalities:
  1. to claim or increase a tax without a law establishing such claim or increase;
  2. to institute unequal treatment for taxpayers that are in an equivalent situation, it being forbidden to make any distinction by virtue of the professional occupation or function performed by them, regardless of the legal designation of the income, instruments or rights;
  3. to collect tributes:
  4. for taxable events that occurred before the effectiveness of the law that instituted or increased them;
  5. in the same fiscal year in which the law that instituted or increased them was published;
  6. to use tributes for purposes of confiscation;
  7. to establish limitations to the traffic of persons or goods by means of interstate or intermunicipal tributes, except for the collection of toll fees for the use of highways maintained by the Government;
  8. to institute taxes on:
  9. property, income, or services of one by another;
  10. temples of any cult;
  11. property, income, or services of political parties, including their foundations, of worker unions, and of non-profit educational and social assistance institutions, with due regard for the requirements of the law;
  12. books, newspapers, periodicals, and paper intended for the printing thereof;
  13. The prohibition contained in Item III b. does not apply to the taxes set forth in Articles 153 I, II, IV, and V, and 154 II.
2. The prohibition contained in Item VI a. extends to autonomous government entities and foundations instituted and maintained by the Government as regards the property, income and services connected with their essential purposes or resulting therefrom.

3. The prohibitions contained in Item VI a. and in the preceding paragraph do not apply to property, income, and services connected with the exploitation of economic activities governed by the rules that apply to private undertakings or to undertakings in which users pay consideration or prices or tariffs, not exempt the party who agreed to buy real property from the obligation to pay tax there on.

4. The prohibitions contained in Item VI (b) and (c) encompass only the property, income, and services connected with the essential purpose of the entities mentioned therein.

5. The law determines measures for consumers to obtain information regarding the taxes levied on goods and services.

6. Any subsidy or exemption, reduction of assessment basis, concession of presumed credit, amnesty or remission, related to taxes, fees or contributions, may only be granted by means of a specific federal, state or municipal law, which provides exclusively for the above-enumerated matters or the corresponding tax, fee or contribution, without prejudice to the provisions of Article 155 2. XII g.

7. The law may impose upon the taxpayer the burden of the payment of a tax or contribution, whose taxable event will occur later, the immediate and preferential restitution of the amount paid being ensured, in case the presumed taxable event does not occur.

Article 151: Limits to the Republic

1. It is forbidden for the Republic:
  1. to institute taxes that are not uniform throughout the entire national territory or that imply a distinction or preference regarding a State, the Federal District, or a Municipality to the detriment of another, provided that tax incentives may be granted to balance social economic development among the various regions of Brazil;
  2. to tax income from public debt bonds of the States, of the Federal District, and of the Municipalities, as well as the compensation and earnings of the respective public agents, at levels above those established for its own bonds and agents;
  3. to institute exemptions from taxes within the jurisdiction of the States, the Federal District, or the Municipalities.

Article 152: Forbidden to Divisions

It is forbidden for the States, the Federal District and the Municipalities to establish a tax difference between goods and services of any nature by virtue of their origin or destination.

Section III Federal Taxes

Article 153: Taxes of the Federation

0. It is incumbent upon the Republic to institute taxes on:
  1. imports of foreign products;
  2. exports to other countries of national or nationalized products:
  3. income and earnings of any nature;
  4. industrialized products;
  5. transactions of credit, foreign exchange, and insurance, or transactions with instruments and securities;
  6. rural property;
  7. large fortunes, according to a supplemental law.
1. The executive Branch may, with due regard for the conditions and limits established in the law, alter the rates of the taxes listed in Items I, II, IV, and V.

2. The tax established in Item III:
  1. shall be based on criteria of generality, universality, and progressiveness according to the law;
  2. shall not be levied, according to the terms and limits established in the law, on income derived from retirement and pension paid by the social security system of the Republic, of the States, of Federal District, and of the Municipalities to a person with over sixty-five years of age and whose total income consists exclusively of work pay.
3. The tax set forth in Item IV:
  1. shall be selective, based on the essentiality of the product;
  2. shall be non-cumulative, and the tax due for each transaction shall be offset by the amount charged at the previous transactions;
  3. shall not be levied on industrialized products intended for export.
4. The tax set forth in Item VI shall have its rates established in such a manner as to discourage the maintenance of unproductive real property and shall not be levied on small rural areas, as defined by law, when they are explored by himself or with his family, by an owner who has no other real property.

5. Gold, when defined by law as a financial asset or negotiable instrument, is subject exclusively to the tax mentioned in item V of the main provision of this article, which is due on the original transaction; the minimum rate is one per cent, ensuring the transfer of the collected amount on the following terms:
  1. thirty per cent to the State, the Federal District, or the Territory, depending on the origin;
  2. seventy per cent to the Municipality of origin.
Article 154: National Taxes

The Republic may institute:
  1. by means of a supplemental law, taxes not listed in the preceding article, provided they are non-cumulative and have a specific taxable event or assessment basis other than those specified in this Constitution;
  2. upon the imminence or in the case of foreign war, extraordinary taxes, whether or not included in its taxing power, which shall be gradually suppressed when the causes for their creation ceased.
Section IV State and Federal District Taxes

Article 155: State and Federal District

0. The states and the Federal District shall have the power to institute taxes on:
  1. transfer by death and donation of any property or rights;
  2. transactions relating to the circulation of goods and to the rendering of interstate and inter municipal transportation services and services of communication, even when such transactions and renderings begin abroad;
  3. ownership of automotive vehicles.
1. The tax established in item I:
  1. for real property and respective rights is within the jurisdiction of the Federal District or of the State where the property is located;
  2. for assets, instruments, and credits is within the jurisdiction of the Federal District or of the State where the probate or enrolment is processed, or where the donor has his or her domicile;
  3. shall have its authority regulated by a supplemental law:
  • if the donor is domiciled or resident abroad;
  • if the deceased owned property, was resident or domiciled or had his or her probate processed abroad;
  • shall have its maximum rates established by the Federal Senate.
2. The tax established in item II shall observe the following:
  1. it shall be non-cumulative and the tax due on each transaction of circulation of goods or rendering of services shall be offset by the amount charged at the previous ones by the same or by another State or by the Federal District;
  2. exemption or non-levy, except as otherwise determined in the law:
    • shall not imply a credit for offset against the amount due on the following transactions or rendering or services;
    • shall cause the annulment of the credit for the previous transactions;
    • may be selective, according to the essentiality of the goods or services;
    • a resolution of the Federal Senate, on the initiative of the President of the Republic or of one third of the Senators, approved by an absolute majority of its members, establishes the rates that are to apply to interstate and export transactions and rendering of services;
  3. the Federal Senate may:
    • establish minimum rates for internal transactions, by a resolution on the initiative of one third and approved by an absolute majority of its members;
    • establish maximum rates for the same transactions to resolve a specific conflict involving interests of States, by a resolution on the initiative of an absolute majority and approved by two thirds of its members;
    • unless otherwise determined by the States and the Federal District, according to Item VII g), the internal rates for transactions of circulation of goods and of rendering of services may not be lower than those established for interstate transactions;
  4. the following shall be adopted for transactions and for rendering of goods and services to end consumers located in another State:
    • an interstate rate, when the recipient is a taxpayer;
    • an internal rate, when the recipient is not a taxpayer;
    • in the event of Sub item a. of the preceding item, the tax corresponding to the difference between the internal rate and the interstate rate shall be attributable to the State where the recipient is located;
    • shall also be levied:
    • on the entry of goods imported from abroad, even in the case of goods intended for consumption or for the fixed assets of the establishment, as well as on services rendered abroad, the tax being attributable to the State where the establishment receiving the goods or services is located;
    • on the total value of the transaction, when goods are supplied with services not included in the taxing power of the Municipalities;
  5. shall not be levied:
    • on transactions transferring industrialized products abroad, excluding semi-processed products as defined in a supplemental law;
    • on transactions transferring oil, including lubricants, liquid and gaseous fuels derived there from and electric energy to other States;
    • on gold, in the events defined in Article 153 (5);
    • shall not include in its assessment basis the amount of the tax on industrialized products, when the transaction made between taxpayers and involving a products intended for industrialization or sale, represents a taxable event for both taxes;
  6. a supplemental law shall:
    • define the taxpayers;
    • deal with tax substitution;
    • regulate the system for offsetting the tax;
    • establish, for purposes of collection of the tax and definition of the liable establishment, the location of transactions of circulation of goods and of rendering of services;
    • exclude from levy of the tax, in export to other countries, services and products other than those mentioned in Item X a);
    • provide for the maintenance of a credit for services and goods remitted to another State and exported to other countries;
    • regulate the manner in which, by resolution of the States and the Federal District, tax exemptions, incentives and benefits shall be granted and revoked.
3. With the exception of the taxes mentioned in item II of the caption of the present article, and Article 153 I and II, no other tribute may be levied on transactions concerning electric energy, telecommunications services, petroleum by-products, fuels and minerals of the country.

Section V Municipal Taxes

Article 156: Municipal Taxes

0. It is incumbent upon the Municipalities to institute taxes on:
  1. urban real property;
  2. transfer of propriety among alive persons, on any account and for consideration, of real property by nature or physical accession and of any in rem rights to real property, except for collateral, as well as the assignment of rights to the purchase thereof;
  3. services of any nature not included in Article 155 II, as defined in a supplementary law.
  4. services of any nature not included in Article 155 I b), as defined in a supplemental law.
1. The tax set forth in Item I may be progressive, according to a municipal law, in order to ensure achievement of the social function of the property.

2. The tax set forth in Item II:
  1. shall not be levied on the transfer of property or rights incorporated into the assets of a legal entity to pay up its capital, nor on the transfer of property or rights as a result of consolidation, merger, spin off of extinction of a legal entity, unless, in the latter cases, the preponderant activity of the purchaser is the purchase and sale of such property or rights, the lease of real property or leasing;
  2. is attributable to the Municipality where the property is located.
3. As regards the tax established in item III, a supplementary law shall:
  1. establish its maximum rates;
  2. exclude exportations of services to other countries from levy of the said tax.
4. A supplemental law shall:
  1. establish the maximum rates for the taxes set forth in Items III and IV;
  2. exclude exports of services abroad from levy of the tax set forth in item IV.
Section VI Apportionment of Tributary Revenues

Article 157: Attributions for the States

0. The following shall be attributed to the States and the Federal District:

  1. the proceeds from the collection of the federal tax on income and earnings of ny nature withheld at source from income paid on any account by them, their autonomous government entities, and by the foundations they institute and maintain;
  2. twenty per cent of the proceeds from the collection of the tax that the Republic may institute in exercising the authority conferred in by Article 154 I.

Article 158: Attribution to the Municipalities

0. The following is attributed to the Municipalities:
  1. the proceeds from the collection of the federal tax on income and earnings of any nature withheld at source from income paid on any account by them, their autonomous government entities and by foundations instituted or maintained by them;
  2. fifty per cent of the proceeds from the collection of the Federal tax on rural property for property located in the Municipalities;
  3. fifty per cent of the proceeds from the collection of the State tax on the ownership of automotive vehicles licensed in their territories;
  4. twenty-five per cent of the proceeds from the collection of the State tax on transactions of distribution of goods and on rendering of services of interstate and intermunicipal transportation and of communication services.
1. The revenue portions attributed to the Municipalities as mentioned in Item IV shall be credit according to the following criteria:
  1. at least three quarters, in proportion to the value added in the transactions of distribution of goods and rendering of services carried out in their territories;
  2. up to one quarter, as established in state law or, in the case of the Territories, in federal law.
Article 159: Delivery

0. The Republic shall deliver:

  1. of the proceeds from the collection of taxes on income and earnings of any nature and non-manufactured products, forty-seven per cent in the following manner:
    • twenty-one wholes and five tenths per cent to the Participation Fund of the States and of the Federal District;
    • twenty-two wholes and five tenths per cent to the Participation Fund of the Municipalities;
    • three per cent, for allocation to programs to finance the productive sector of the North, Northeast, and Center West Regions, through their regional financial institutions, according to regional development plans, the semi-arid area of the Northeast being assured of half the funds intended for the Region as established in the law;
    • of the proceeds from the collection of the tax on industrialized products, ten per cent to the States and to the Federal District, in proportion to the value of respective exports of industrialized products.
1. For purposes of calculating the amount to be delivered under Item I, the portion of the collection of the tax on income and earnings of any nature belonging to the States, the Federal District, and the Municipalities according to Article 157 I, and 158 I shall be excluded.

2. No federated unit may be allocated an amount in excess of twenty per cent of the amount referred to in Item II, and any excess shall be distributed among the other participants, maintaining the apportionment criterion established therein for the latter.

3. It is forbidden to make any retention or restriction regarding the delivery and employment of the funds attributed under this section to the States, the Federal District, and the Municipalities, including any tax additions and increase.

Article 160: Prohibition

The prohibition mentioned in the present article does not prevent the Union and the states from remitting the funds on condition of payment of their credits, including those of the autonomous government agencies.

Article 161: Supplemental Law

0. A supplemental law shall:
  1. define the added value for the purposes of Article 158 1. I;
  2. establish rules for the delivery of the funds dealt with in Article 159, especially the criteria for apportionment of the funds mentioned in its Item I, seeking to maintain social and economic balance among States and among Municipalities;
  3. deal with the monitoring, by the beneficiaries, of the calculation of the quotas and release of the participations set forth in Articles 157, 158, and 159.
1. The Audit Tribunal of the Union calculates the quotas referring to the participation funds mentioned in Item II.

Article 162: Amount Publication

0. The Republic, the States, the Federal District, and the Municipalities shall announce, on or before the last day of the month following the month of collection, the amounts of each of the taxes collected, the funds received, the tax sums delivered and to be delivered and the numerical expression of the apportionment criteria.

1. The data disclosed by the Republic shall be discriminated by State and by Municipality; those of the States by Municipality.

Chapter II Government Finances

Section I General Rules

Article 163: Public Finances Law

A supplemental law deals with:
  1. government finances;
  2. foreign and domestic government debt, including the debt of the autonomous government entities, foundations, and other entities controlled by the Government;
  3. rendering of guarantees by government entities;
  4. issuance and redemption of government debt bonds;
  5. supervision of financial institutions;
  6. foreign exchange transactions carried out by agencies and entities of the Republic, of the States, of the Federal District, and of the Municipalities;
  7. compatibility of the functions of the official credit institutions of the Republic, safeguarding all the characteristics and operating conditions of those intended for regional development.
Article 164: Coin Money, Central Bank, Control

0. The authority of the Republic to issue money is exercised exclusively by the Central Bank.

1. It is forbidden for the Central Bank to directly grant loans to the National Treasury and to any agency or entity which is not a financial institution.

2. The Central Bank may purchase and sell instruments issued by the National Treasury in order to regulate the money supply of the interest rate.

3. The available cash of the Republic has to be deposited at the Central Bank; that of the States, of the Federal District, of the Municipalities, and of the agencies or entities of the Government and of the companies controlled by the Government, at official financial institutions, excepting the cases established in the law.
Section II Budgets

Article 165: Budget Plan & Legislation

0. Laws in the initiative of the Executive Branch establish:
  1. the pluriannual plan;
  2. the budget directives;
  3. the annual budgets.
1. The law that institutes the pluriannual plan establishes, by Region, the directives, objectives, and targets of the Federal Government for the capital expenses and other expenses resulting therefrom and for those regarding continuous programs.

2. The budget directives law contains the targets and priorities of the Federal Government, including the capital expenses for the following fiscal year, guides the preparation of the annual budget law, deals with changes in tax legislation, and establishes the investment policy for official promotion financing agencies.

3. The Executive Branch, within thirty days of the end of each two month period, publishes a summarized report on budget implementation.

4. The national, regional, and sectorial plans and programs set forth in this Constitution are prepared in accordance with the pluriannual plan and examined by Congress.

5. The annual budget law comprises:
  1. the tax budget for the Branches of the Republic, their funds, agencies, and entities of direct and indirect administration, including foundations instituted and maintained by the Government;
  2. the investment budget of the companies in which the Republic directly or indirectly holds the majority of the voting capital;
  3. the social security budget, covering all entities and agencies of direct or indirect administration connected with social security, as well as funds and foundations instituted and maintained by the Government.
6. The budget law bill is accompanied by a regionalized statement on the effect on revenues and expenses as a result of financial, tax and credit exemptions, amnesties, remissions, subsidies, and benefits.

7. The functions of the budgets established in Paragraph 5. I and II made compatible with the pluriannual plan, include the function of reducing interregional differences according to populational criteria.

8. The annual budget law may not contain any provision that does not represent a forecast of revenues, according to the law.

9.
10. A supplemental law:

  1. deals with the fiscal year, effectiveness, terms, preparation, and organization of the pluriannual plan, of the budget directives law, and of the annual budget law;
  2. establishes rules of financial and property management by the direct and indirect administration, as well as conditions for the institution and operation of funds.
Article 166: Bills, Drafts

0. The bills of law regarding the pluriannual plan, the budget directives, the annual budget, and the additional credits are examined by the two Houses of Congress under the common regulations.
1. A permanent mixed Committee of Senators and Representatives shall
  1. examine and issue its opinion on the bills referred to in this article and on the accounts submitted each year by the President of the Republic;
  2. examine and issue its opinion on the national, regional, and sectorial plans and programs established in this Constitution and exercise budgetary monitoring and supervision, without prejudice to the activity of the other committees of Congress and of its Houses, created under Article 58.
2. Amendments shall be submitted to the mixed Committee, which shall issue its opinion on them, and shall be examined, according to the regulations, by the Plenary Session of the two Houses of Congress.

3. Amendments to the bill of the annual budget law or to bills that modify if may only be approved if:
  1. they are compatible with the pluriannual plan and with the budget directives law;
  2. they specify the necessary funds, allowing only those resulting from the annulment of an expense and excluding those that apply to:
  • appropriations for personnel and their charges;
  • debt servicing;
  • constitutional tax transfers to the States, Municipalities and Federal District; or
  • they are related:
  • to the correction of errors or omissions; or
  • to the provisions of the text of the bill.
4. Amendments to the bill of the budget directives law may not be approved it they are incompatible with the pluriannual plan.

5. The President of the Republic may send a message to Congress to propose the modification of the bills referred to in this article as long as the mixed Committee has not started to vote on the part for which an alteration is being proposed.

6. The bills of the pluriannual plan law, budget directives law and annual budget law are submitted by the President of the Republic to Congress according to the supplemental act referred to in Article 165 (9).

7. To the extent that they do not conflict with the provisions of this section, the other rules regarding legislative procedure shall apply to the bills mentioned in this article.

8. Those funds which, by virtue of a veto, amendment or rejection of the bill of the annual budget law, have no corresponding expenses, may be used, as the case may be, means of special or supplemental credits with prior and specific legislative authorization.

Article 167: Forbidden

The following is forbidden:
  1. to commence programs or projects not included in the annual budget law;
  2. to incur expenses or assume direct obligations that exceed the budgetary or additional credits;
  3. to carry out credit transactions that exceed the amount of capital expenses, excepting those authorized by means of supplemental or special credits for a precise purpose and approved by an absolute majority of the Legislative Branch;
  4. to bind tax revenues to an agency, fund or expense, excepting the sharing of the proceeds from the collection of the taxes referred to in Articles 158 and 159, the allocation of funds for the maintenance and development of education, as determined in Article 212, and the granting of guarantees on credit transactions by advance of revenues, as established in Article 165 (8) as well as in Paragraph 4. of the present article;
  5. to open a supplemental or special credit without prior legislative authorization and without specification of the respective funds;
  6. to reclassify, reallocate, or transfer funds from one programming category to another or from one agency to another without prior legislative authorization;
  7. to grant or use unlimited credits;
  8. to use, without specific legislative authorization, funds from the tax and social security budgets to satisfy a need or cover a deficit of companies, foundations, and funds, including those mentioned in Article 165 (5);
  9. to institute funds of any nature without prior legislative authorization.
1. No investment implemented over more than one fiscal year may be commenced without prior inclusion in the pluriannual plan or without a law authorizing such inclusion, subject to criminal malversion.

2. Special and extraordinary credits shall be effective in the fiscal year in which they are authorized, unless the act authorizing them is promulgated during the last four months of that fiscal year, in which event, the limits of their balances being reopened, they shall be incorporated into the budget of the subsequent fiscal year.

3. Opening of extraordinary credit shall only be allowed to cover unforeseeable and urgent expenses, such as those resulting from war, internal commotion of public calamity, with due regard for the provisions of Article 62.

4. It is permitted to bind proper revenues generated by the taxes referred to in Articles 155 and 156, and the funds mentioned in Articles 157, 158 and 159 I a and b, to the granting of a guarantee or a counter guarantee to the Union, and to the payment of debits owed to the same.

Article 168: Judicial Branch Funds

The funds corresponding to budgetary appropriation, including supplementary and special credits, intended for agencies of the Legislative and Judiciary Branches and of the Public Attorneys Office, are delivered to them by the twentieth day of each month, as set forth in the supplemental act referred to in Article 165 (9).

Article 169: Expenditures

0. 0. Expenditures with Republic, State, Federal District, and Municipality staff, in activity and pensioned, may not exceed the limits established in a supplemental act.

1. Granting of any advantage or increase in compensation, creation of jobs or alteration in career structures, as well as hiring of personnel in any way, by agencies and entities of the direct or indirect administration, including foundations instituted and maintained by the Government, may only be effected:
  1. if there is a prior budgetary appropriation sufficient to cover the estimated personnel expenditures and the accretions resulting therefrom;
  2. if there is specific authorization in the budget directives law, except for public companies and mixed capital companies.