Brazil’s Superior Court clarifies that policy validity, not the contract duration, determines enforceability of tax surety claims
In a recent decision with important implications for taxpayers and insurers, Brazil’s Superior Court of Justice (STJ) ruled that tax guarantee insurance (seguro-garantia) remains enforceable even after the expiration of the main underlying contract — as long as the infraction occurred during the insurance policy period.
The case involved a dispute between the São Paulo State Treasury and a citrus juice producer, and centered on the scope of indemnity under a tax insurance policy tied to special ICMS (state VAT) credit appropriation rules. The STJ’s decision affirms principles of good faith in contractual performance and aligns with SUSEP Circular No. 662/2022, which governs insurance operations in Brazil.
Background: What Was in Dispute?
The company had contracted a tax surety bond to participate in a special ICMS credit regime, allowing it to offset or use accumulated state tax credits under certain conditions.
While the regime was in effect, the company violated program rules, triggering the possibility of a tax assessment. However, the notice of infraction was issued only after the special regime had ended, raising the central legal question: Could the insurance still be activated for a breach that occurred during the policy term, but was only discovered later?
The company argued that, because the official tax penalty was formalized after the contract period, the insurance should no longer apply. The tax authorities contended that the key issue was the timing of the infraction, not the date of enforcement — and that the insurer remained liable.
The STJ’s Decision: The Insurance Policy Period Is What Matters
The Second Panel of the STJ sided with the tax authority. Justice Francisco Falcão, writing for the Court, clarified the following points:
- ✅ Indemnity under a tax surety policy depends on the timing of the insured event, not the duration of the administrative or contractual arrangement that it supported;
- ✅ The infraction occurred during the policy’s effective term, even if the government’s response — such as an audit or fine — happened later;
- ✅ A suspended tax claim (e.g., due to administrative appeals) does not nullify the insurer’s obligation; it only pauses enforcement temporarily.
To illustrate, the Court stated that even if the company breached its tax obligations on the last day of the insurance policy’s validity, the government would not be barred from issuing a penalty after that period ended.
This position reflects established principles in contract law and insurance: the triggering event — not the date of discovery or claim — determines whether coverage is in effect.
Why This Matters: Practical Effects for Companies and Insurers
This decision has direct consequences for companies that use surety bonds to secure tax liabilities and for the insurers that issue them:
🔸 Companies must ensure full tax compliance during the life of the insurance policy, even if the contractual arrangement it supports ends earlier;
🔸 Insurers must factor in post-contract risks, as liability may still arise for infractions discovered after expiration, provided they occurred during the policy period;
🔸 Tax authorities are empowered to enforce insurance claims as long as they prove that the taxable event or breach occurred while the policy was active — regardless of when it was audited or fined.
Final Takeaway: Legal Certainty for the Tax System
The STJ’s decision brings clarity and legal certainty to the use of insurance instruments in Brazil’s tax system. It reaffirms that the policy’s timeline, not the expiration of the broader fiscal contract or special regime, governs the enforceability of the insurer’s obligation.
It also reinforces the role of good faith and strict compliance with the terms of both the tax regime and the insurance contract. For businesses relying on tax surety policies, this serves as a clear signal: stay compliant throughout the policy period, and don’t assume the risk ends when the contract ends.