Brazil’s Superior Court clarifies taxpayer status in fiduciary alienation, reinforcing legal certainty for lenders and the real estate sector
On March 12, 2025, Brazil’s Superior Court of Justice (STJ) issued a binding ruling under Repetitive Theme No. 1,158, establishing that a fiduciary creditor is not liable for urban property tax (IPTU) on real estate held as collateral before ownership consolidation and possession are transferred.
This precedent offers clear guidance to all Brazilian courts (pursuant to Article 927 of the Civil Procedure Code) and reinforces protections for financial institutions, especially in real estate-backed credit operations.
Background: Municipality Sought to Hold Bank Liable for Debtor’s IPTU
The case arose from a tax enforcement action filed by the Municipality of São Paulo against Itaú Unibanco, which was listed as the fiduciary owner of a property in default.
The municipality argued that under fiduciary alienation, the bank held full ownership — even if conditional — and should therefore be considered the taxpayer for IPTU purposes.
However, the São Paulo State Court ruled in favor of the bank, stating that fiduciary ownership is resolvable (conditional) and that the lender has only indirect possession, which is insufficient to establish tax liability under Article 34 of Brazil’s National Tax Code (CTN).
The case was escalated to the STJ due to the widespread impact of similar claims across the country.
The STJ’s Ruling: No Tax Liability Without Possession or Full Ownership
In a unanimous decision, the STJ’s First Panel denied the municipality’s appeal and affirmed the following legal thesis:
“The fiduciary creditor, prior to consolidation of ownership and transfer of possession of the property subject to fiduciary alienation, cannot be considered the taxpayer of IPTU, as they do not meet any criteria under Article 34 of the National Tax Code.”
Justice Teodoro Silva Santos, the reporting judge, explained that only the following parties may be legally responsible for IPTU:
- The property owner,
- The holder of a useful domain (in leasehold arrangements),
- The possessor with animus domini — someone who acts as the effective owner.
Because fiduciary creditors hold title solely as a security interest, and do not intend to use or benefit from the property, they do not qualify as IPTU taxpayers under current law.
Legal Foundations
The Court cited several legal provisions to support its reasoning:
- Article 34 of the CTN: Only those with true ownership or effective possession may be taxed.
- Articles 22 and 27(§8) of Law No. 9,514/1997: Define fiduciary ownership as resolvable and assign IPTU liability to the fiduciary debtor (i.e., borrower) until the creditor assumes possession.
- Law No. 14,620/2023: Reinforces this rule, adding that the debtor must also cover condominium fees and taxes.
Practical Impact: Legal Clarity for Lenders and Real Estate Markets
This decision has significant implications for:
- Banks and financial institutions issuing mortgage-backed credit,
- Real estate developers using fiduciary structures,
- Municipal governments seeking IPTU enforcement.
By drawing a clear legal line, the STJ resolves conflicting lower-court rulings and prevents municipalities from improperly targeting fiduciary creditors who do not enjoy or control the property.
The Court also clarified that IPTU may only be charged to the creditor after property consolidation and possession — events that typically occur only in cases of borrower default.
Final Thoughts: A Victory for Legal Certainty
Repetitive Theme No. 1,158 strengthens the alignment between tax law and civil property law in Brazil. It ensures that tax liability corresponds with actual control, benefit, or legal entitlement to the property — not merely the holding of title as collateral.
For tax professionals, financial institutions, and property market players, this decision delivers legal certainty and operational predictability, crucial for credit structuring and risk management.