Brazil Supreme Court bans IPTU rate hikes based on property size

The Brazilian Supreme Federal Court (STF) has unanimously ruled that municipalities cannot set higher Property and Territorial Urban Tax (IPTU) rates based solely on the physical size or area of a property. The decision establishes a general rule that while the Constitution allows for progressive tax rates based on property value, location, or usage, physical square footage is not a valid constitutional criterion for increasing the tax rate percentage.

The ruling originated from a legal challenge to a law in Chapecó, Santa Catarina, which applied a 1% rate to properties with a built area exceeding 400 square meters. Justice Dias Toffoli, the rapporteur, emphasized that property area is distinct from market value and does not fall under the constitutionally authorized criteria for fiscal progressivity.

While the court prohibited using size as a justification to raise the tax rate (the 'aliquot'), it did not prohibit using area as part of the 'calculation base' to determine a property's market value. Consequently, larger properties will still naturally have higher tax amounts due to higher valuations, but the rate itself cannot be increased simply because the building is larger.