In early November 2024, the Office of the Attorney General (AGU) released an opinion prepared by its Chamber for Promoting Legal Certainty in the Business Environment on the levying of the Urban Land and Property Tax (IPTU) on federal public properties assigned to public service concessionaires [1]. The AGU’s study and conclusions stem from a public input process in which it sought grounds for its guidance through extensive consultation with various associations representing mayors, attorneys, concessionaires and sector bodies, among others.

The AGU took a position against charging IPTU on these properties, understanding that they would be covered by the reciprocal immunity provided for in article 150, item VI, and §§2 and 3 of the Constitution.

The opinion did not focus on the nature of the person holding possession or ownership of the property — the so-called “subjective criterion” — a point generally debated by the Supreme Court, but on the allocation of the property to a public service, a context addressed only tangentially in Topic 1,297 [2].

Setting aside the legal nature of whoever holds the property or any profit-making purpose arising from its use as the central grounds for immunity, the AGU’s understanding seeks to discuss its effects in light of the greater purpose it is intended to serve, the federative principle. In this context, it addresses practical issues of various concession models and economic sectors to illustrate the impacts of tax interference by one level of the federation in a concession project developed by another, especially in terms of maintaining the economic and financial balance of contracts and the attractiveness of business with the public sector.

For the AGU, therefore, at least with regard to properties assigned for use in public service concessions, the criterion for reciprocal immunity is objective and depends on whether or not the property is used for the services provided, that is, whether it is allocated to the concession activities. This criterion not only fits the very purpose of the constitutional allocation of public property — which, in essence, is intended for public purposes, which is precisely why it enjoys prerogatives such as relative inalienability, imprescriptibility and tax immunity — but is also consistent with the federative pact ensured by immunity, based on the collaboration that characterizes cooperative federalism.

It is on this basis that the AGU establishes that IPTU immunity will apply (1) when the property is owned by the Federal Government or by an entity also covered by the reciprocal immunity rule (the granting authority); (2) when the property is delivered to the concessionaire by virtue of the public service concession and to enable the provision of the service, including when intended for the fulfillment of a contractual or regulatory obligation; and (3) when the property is not used for economic activity in the strict sense and has not been withdrawn from the granted public service.

A major step toward a stable environment

This is indeed important guidance for providing greater legal certainty to public concessions, also giving predictability to future and current concessionaires, which will be able, at least in this aspect of their operations, to plan the necessary costs and investments more efficiently. As a result, it is hoped that this predictability and management can be converted into direct benefits for service users, including affordable tariffs.

Also for projects being structured or without a signed contract, clarity regarding tax immunity for real estate used in the concession may attract private capital, not necessarily because of the financial impact of not charging the tax itself, but because of the creation of a stable and predictable regulatory environment.

The discussion about charging IPTU on federal public properties assigned to concessionaires goes beyond the tax field [3], requiring a broader analysis from the perspective of other fields, notably Administrative Law. The AGU’s position, in this sense, is an important step toward a stable environment, reconciling the interests of federative entities with the need to protect the concession model as a tool for national development.

[1] Available at: https://www.gov.br/agu/pt-br/assuntos-1/sejan/parecer_cgu_sejan.pdf. Accessed on November 18, 2024.

[2] We say “tangentially” because, although it is discussed, this is not the central debate of the topic established by the STF, whose leading extraordinary appeal discusses, in light of article 150, VI, “a” of the Federal Constitution, whether the lease of federal real estate to a rail transport public service concessionaire removes reciprocal tax immunity, with the consequent levying of IPTU on the property allocated to the provision of the service.

[3] For this same discussion from a tax perspective, see REAL, Nicole Côrte. AGU posiciona-se contra IPTU sobre imóveis públicos federais cedidos a concessionários. Available at: https://www.conjur.com.br/2024-nov-12/agu-posiciona-se-contra-iptu-sobre-imoveis-publicos-federais-cedidos-a-concessionarios/. Accessed on November 18, 2024.

Originally published by Conjur (in Portuguese).