According to the Supreme Court ruling social security tax debt can only be claimed during a period of five years, not ten years as currently practiced by the administration.

In its Session on June 11, 2008, the Court declared articles 45 and 46 of the law nº 8.212/91 unconstitutional. Articles 45 and 46 established a time line for claiming social security contributions as well as a statutory period of limitation of ten years.

This ruling is binding for all lower courts. As a consequence, social security taxes will follow the standard five-year term.

Regarding the effects of the ruling, the court determined that social security taxes cannot be claimed by the administration using the ten-year term. This effect is valid for all taxpayers whether they filed a refund claim via administrative or judicial proceedings or not. It also applies to possible future claims of social security taxes.

Regarding a refund of social security tax payments assessed under the regulations now declared unconstitutional, the Court determines a more restrictive effect of unconstitutionality.

A refund of such social security taxes will only be granted to those taxpayers who have filed a refund claim through administrative or judicial proceedings no later than June 11, 2008, the date of the Courts decision. All other taxpayers who did not challenge assessed social security contributions or filed a refund claim after June 11, 2008, are not eligible for a refund.

We at Prado Garcia Advogados welcome the Supreme Court decision in favor of the taxpayers. However, it is our opinion that the restitution of unlawful assessed and paid taxes may only be limited under specific circumstances.

According to the Court ruling, taxpayers who did not file for a refund until the date of the Court decision, June 11, 2008, are not entitled to a refund.Instead of a refund the taxpayer may be entitled to offsetting against another tax debit balance. He may reduce or pay off debt deducting his credit from the debt.

Refund is the alternative for taxpayers who have a right to a credit and owe no tax debts to offset that amount against. Refund and offsetting are distinct legal figures.  

In any case, Ministro Gilmar Mendes who delivered the opinion of the court extended the restrictive effects of unconstitutionality and rejects not only a refund but also the possibility of offsetting for all taxpayers who did not file for a refund until June 11, 2008.

Although the Supreme Court may stipulate restrictions on the effects of unconstitutionality, those restrictions may not violate individual taxpayers’ rights granted by the constitution, especially considering the constitutional legality principle according to which the judiciary may not legislate.

This latest Supreme Court decision shows the importance of challenging any unlawful and unconstitutional taxes and contributions, preserving personal rights and, consequently, enabling a possible refund.