The Urban Building and Land Tax (IPTU) is a municipal tax levied on property ownership within the urban zoning of the municipality, and its calculation basis is the venal value of the property, understood as the market price of the property under normal conditions.
As owners, individuals or legal entities have the right to freely use, enjoy, or dispose of their property, as well as to reclaim it from anyone who unjustly possesses or holds it. This means that, when legally protected, they may use the property as they wish, such as for building, gardening, leasing, and selling at any time.
But what happens in cases where the owner is prevented from carrying out any activity on the soil due to use restrictions?
It is not uncommon to find properties subject to IPTU, with permanent prohibitions against any construction or occupation of the area, such as environmental restrictions due to the presence of a conservation area or watercourse; administrative easements for the establishment of power transmission lines or pipelines; and road impediments, such as planned street layouts.
Typically, for these situations, municipalities provide in their legislation for the application of a depreciation factor on the venal value, which reduces a percentage of the amount to be paid as tax. However, in many cases, the applied reduction is not proportional to the impact, not to mention situations where the municipality completely disregards the application of the depreciation factor, leading to undue charges to taxpayers.
Legally, it is understood that impediments preventing the partial or full use of the property remove the inherent powers of property rights, as it is practically impossible to use or enjoy the property as originally intended, since the property is destined either for environmental preservation or public service. Considering that taxation is due on the property – the taxable event of IPTU – and since it is not possible to fully exercise such rights, the tax should not be enforceable.
Moreover, if the property is affected to the point of being unusable for any purpose or only for excessively restricted uses, its drastic devaluation is evident. It is considered, then, that the economic content of the property has been depleted, so that IPTU cannot be levied (at least, not in full), as the municipality cannot demand the tax based on an unreal venal value that does not reflect the market value.
Despite the revenue-driven bias of municipal tax authorities regarding the issue, court rulings have been increasingly favorable to taxpayers, recognizing that the affectation of properties by environmental issues, street opening projects, or administrative easements to such an extent that they create obstacles to property rights and lead to the devaluation of the property, removes the legitimacy of IPTU incidence – at least, in its entirety – given the absence of economic expression of the property and consequent depletion of the taxable base.
In this context, the issue is open to discussion both administratively and judicially, and in the latter, there is also the possibility of recovering undue payments from the last five years.
By Fernanda Derenievicki Tossulino e Viviane de Carvalho Lima
