Toffoli maintains tax relief for Rio for six months

Minister Dias Toffoli, of the Federal Supreme Court (STF), extended fiscal relief to the state of Rio de Janeiro until mid-2026, keeping the government in the Fiscal Recovery Regime.

The measure maintains the effects of an injunction granted by Toffoli in June this year. According to the minister, this period will allow the Rio de Janeiro government to continue its activities normally while negotiating with the federal government its entry into the State Debt Payment Program (Propag), according to the law approved at the end of this year.

Furthermore, Toffoli maintained the suspension of a fine imposed by the Union due to alleged non-compliance with Rio’s fiscal recovery plan. The installments paid next year, however, must take into account the amounts that were not paid in 2024 and 2025, and added to the amount of R$4.9 billion, both readjusted according to the IPCA.

Toffoli considered that, if the injunction was not extended, it would have the potential to cause serious and irreparable damage to the administration of the state of Rio and the interest of the community, increasing a scenario of instability between the government of Rio and the federal government.

“At the end of this period (first 6 months of 2026) or consensus has been reached in a political or administrative environment, the parties must petition the case for a new deliberation, without prejudice to the negotiations initiated after the provocation in this dispute progressing to a proposal for resolving the dispute”, wrote Toffoli.

During the process, the federal government argues that the government of Rio has not complied with the fiscal control provisions of the recovery regime, increasing personnel expenses. According to the Treasury, Rio’s expenses with employees grew by 20% in 2022 and 8% in 2023, above inflation, with adjustments and benefits for various categories.

The Rio government, however, claims that the crisis was worsened by the Union itself, which reduced the ICMS rate, generating a drop in state revenue.

In November this year, however, the National Congress approved the law establishing Propag and the Rio government has already expressed interest in joining the program. According to Propag, states and municipalities will be able to join the program to pay and restructure their debts with the Union. The program allows states to obtain reduced real interest, which can vary between 0%, 1% or 2% above the IPCA, depending on conditions such as advance payments and the transfer of assets to the federal government.