CONSTITUTION OF BRAZIL

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TITLE VI - TAXATION AND BUDGET

CHAPTER I - THE NATIONAL TAX SYSTEM

SECTION I - GENERAL PRINCIPLES

Article 145. The Union, the states, the Federal District and the municipalities may institute the following tributes:
I - taxes;
II - fees, by virtue of the exercise of police power or for the effective or potential use of specific and divisible public services, rendered to the taxpayer or made available to him;
III - benefit charges, resulting from public works.
Paragraph 1 - Whenever possible, taxes shall have an individual character and shall be graded according to the economic capacity of the taxpayer, and the tax administration may, especially to confer effectiveness upon such objectives, with due respect to individual rights and under the terms of the law, identify the property, the incomes and the economic activities of the taxpayer.
Paragraph 2 - Fees may not have the assessment basis reserved for taxes.

Article 146. A supplementary law shall:
I - provide for conflicts of competence concerning tax matters between the Union, the states, the Federal District and the municipalities;
II - regulate the constitutional limitations on the power to tax;
III - establish general rules concerning tax legislation, especially with regard to:
a) the definition of tributes and their types, as well as, regarding the taxes specified in this Constitution, the definition of the respective taxable events, assessment bases and taxpayers;
b) tax liability, assessment, credit, limitation and laches;
c) adequate tax treatment for the cooperative acts of cooperative associations;
d) definition of diferentiated and favorable treatment for micro enterprises and small size enterprises, including special or simplified regimes in the cases of the tax established by article 155, II, of the contributions established by article 195, I and paragraphs 12 and 13, and of the contribution subject of article 239.

Letter d added by CA 42, December 19th 2003. The CA 42 became known as the Tax Reform.
Sole paragraph. The supplementary law subject of clause III, d, may also institute a regime of centralized collection of taxes and contributions of the Union, States, Federal District and municipalities, with observance of the following:
I - it shall be optional for the taxpayer;
II - different enrollment conditions may be established for each State;
III - the collection shall be unified and centralized and the distribution of the shares of proceeds to the respective federated entities shall be immediate, any retention or conditioning being forbidden;
IV - the collection, the auditing and the execution may be conducted jointly by the federated entities, with adoption of a sole national database of tax payers.

Sole paragraph and respective clauses added by CA 42, December 19th 2003.

Article 146-A. Supplementary law may establish special criteria of taxing, with the purpose of preventing unequalities of competition, without prejudice of the competence of the Union, by means of a law, to establish norms with the same objective.

Article 146-A added by CA 42, December 19th 2003.

Article 147. In a federal territory, state taxes are within the competence of the Union and, if the territory is not divided into municipalities, also municipal taxes; municipal taxes are within the competence of the Federal District.

Article 148. The Union may, by means of a supplementary law, institute compulsory loans:
I - to meet extraordinary expenses resulting from public calamity, foreign war or the imminence thereof;
II - in the case of public investment of an urgent nature and relevant national interest, observing the provisions of article 150, III, b.
Sole paragraph - The use of funds deriving from a compulsory loan shall be linked to the expense that justified the institution thereof.

Article 149. The Union shall have the exclusive competence to institute social contributions, contributions of intervention in the economic order and contributions of interest of categories of employees or employers, as an instrument of its activity in the respective areas, observing the provisions of articles 146, III, and 150, I and III, and without prejudice to the provisions of article 195, paragraph 6, as regards the contributions mentioned in the latter article.
Paragraph 1. The States, the Federal District and the municipalities shall institute contribution, paid by their servers, for the funding, in benefit of them, of the social security regime subject of article 40, and the rate shall not be inferior to the rate of the contribution paid by the servants holders of effective offices of the Union.

Former sole paragraph was turned into paragraph 1 by CA 41, December 19th 2003. Original text read: "Sole paragraph - The states, the Federal District and the municipalities may institute a contribution payable by their employees to fund social security and assistance systems for the benefit of the latter." After the CA, States and municipalities are obliged to collect a social security contribution from their civil servants.
Paragraph 2. The social contributions and the contributions of intervention in the economic order referred to in the caput of this article:

Paragraph 2 added by CA 33, December 11th 2001.

I - shall not be levied on proceeds derived from exportations;

Clause I added by CA 33, December 11th 2001.

II - shall be levied on the importation of foreigner products or services;

Clause II added by CA 42, December 19th 2003.

III - may have rates:
a) ad valorem, having as assessment bases the turnout, the gross revenue or the amount of the transaction and, in case of importation, the customs value;
b) specific, having as assessment bases the measure unit adopted.

Clause III added by CA 33, December 11th 2001.

Paragraph 3. The individuals recipients of importation transactions may be equiparated to corporations, in the manner prescribed by law.
Paragraph 4. The law shall define the cases in which the contributions shall be levied only once.

Paragraph 3 and 4 added by CA 39, December 19th 2002.

SECTION II - LIMITATIONS ON THE POWER TO TAX

Article 150. Without prejudice to any other guarantees ensured to the taxpayers, the Union, the states, the Federal District and the municipalities are forbidden to:
I - impose or increase a tribute without a law to establish it;
II - institute unequal treatment. ent for taxpayers who are in an equivalent situation, it being forbidden to establish any distinction by reason of professional occupation or function performed by them, independently of the juridical designation of their incomes, titles or rights;
III - collect tributes:
a) for taxable events that occurred before the law which instituted or increased such tributes came into force;
b) in the same fiscal year in which the law which instituted or increased such tributes was published;
c) before the elapsing of ninety days counted from the date of publication of the law which institute them or raised them, with due regard of the provisions of letter b;

Letter c added by CA 42, December 19th 2003. Before this CA, it was usual to see the governments publishing a special issue of the official gazette on December 31st, only to increase taxes on January 1st. Now, the government must wait ninety days or until the next year, whatever comes later; however, there are exceptions, established by the paragraph 1 of this same article.

IV - use a tribute for the purpose of confiscation;
V - establish limitations on the circulation of persons or goods, by means of interstate or intermunicipal tributes, except for the collection of toll fees for the use of highways maintained by the Government;
VI - institute taxes on:
a) the property, income or services of one another;
b) temples of any denomination;
c) the property, income or services of political parties, including their foundations, of worker unions, of non-profit education and social assistance institutions, observing the requirements of the law;
d) books, newspapers, periodicals and the paper intended for the printing thereof.
Paragraph 1 - The prohibition set forth in item III, b, shall not apply to the taxes provided upon in articles 148, I, 153, I, II, IV and V, and 154, II; and the prohibition established by clause III, c, shall not apply to taxes mentioned in articles 148, I, 153, I, II, III and V, and 154, II, nor to the fixation of assessment bases of taxes mentioned in articles 155, III, and 156, I.

Paragraph 1: text in purple added by CA 42, December 19th 2003.

Paragraph 2 - The prohibition set forth in item VII a, extends to the autonomous government agencies and to the foundations instituted and maintained by the Government, as regards the property, income and services related to their essential purposes or resulting therefrom.
Paragraph 3 - The prohibitions set forth in item VI, a, and in the preceding paragraph do not apply to the property, income and services related to the exploitation of economic activities governed by the regulations which apply to private undertakings, or in which users pay consideration or prices or tariffs. nor exempt a promissory purchaser of real property from the obligation to pay tax thereon.
Paragraph 4 - The prohibitions set forth in item VI, subitems b and c encompass only the property, income and services related to the essential purposes of the entities mentioned therein.
Paragraph 5 - The law shall determine measures for consumers to be informed about taxes levied on goods and services.
Paragraph 6 - Any subsidy or exemption, reduction of assessment basis, concession of presumed credit, amnesty or remission, related to taxes, fees or contributions, may only be granted by means of a specific federal, state or municipal law, which provides exclusively for the above-enumerated matters or the corresponding tax, fee or contribution, without prejudice to the provisions of article 155, paragraph 2, item XII, g.

Paragraph 6. Text in purple appended by CA 3, March 17th 1993. Before this CA, governments used to, e.g., create a new exemption for producers of wheel chairs when issuing a law on behalf of disabled people.

Paragraph 7 - The law may impose upon the taxpayer the burden of the payment of a tax or contribution, whose taxable event will occur later, the immediate and preferential restitution of the amount paid being ensured, in case the presumed taxable event does not occur.

Paragraph 7 added by CA 3, March 17th 1993. The provisions of this paragraph are applied, for example, to the commerce of fuel, beer and tobacco. The producer of beer, when selling to the wholesalers, pays the taxes which should be paid later by the wholesaler, the retailer and the final consumer.

Article 151. It is forbidden for the Union:
I - to institute a tribute which is not uniform throughout the entire national territory or which implies a distinction or preference regarding a state, the Federal District or a municipality to the detriment of another, it being allowed to grant tax incentives for the purpose of promoting the balanced social and economic development of the various regions of the country;
II - to tax income from public debt bonds of the states, of the Federal District and of the municipalities, as well as the remuneration and earnings of the respective public agents, at levels above those established for its own bonds and agents;
III - to institute exemptions from tributes within the powers of the states, of the Federal District or of the municipalities.

Article 152. The states, the Federal District and the municipalities are forbidden to establish a tax difference between goods and services of any nature, by reason of their origin or destination.

SECTION III - FEDERAL TAXES

Article 153. The Union shall have the power to institute taxes on:
I - importation of foreign products;
II - exportation to other countries of national or nationalized products;
III - income and earnings of any nature;
IV - industrialized products;
V - credit, foreign exchange and insurance transactions, or transactions relating to bonds or securities;
VI - rural property;
VII - large fortunes, under the terms of a supplementary law.
Paragraph l - The Executive Power may, observing the conditions and the limits established in law, alter the rates of the taxes enumerated in items I, II, IV and V.
Paragraph 2 - The tax established in item III:
I - shall be based on the criteria of generality, universality and progressives, under the terms of the law;
II -

Clause II revoked by CA 20, December 15th 1998. Original text read: "II - shall not be levied, under the terms and within the limits established in law, on income deriving from retirement and pension paid by the social security system of the Union, of the states, of the Federal District and of the municipalities, to a person over sixty-five years of age, whose total income consists exclusively of work earnings."

Paragraph 3 - The tax established in item IV:
I - shall be selective, based on the essentiality of the product;
II - shall be non-cumulative, and the tax due in each transaction shall be compensated by the amount charged in previous transactions;
III - shall not be levied on industrialized products intended for export.
IV - shall have its impact deducted on the acquisition of productive assets by the taxpayer, in the manner determined by law.

Clause IV added by CA 42, December 19th 2002.

Paragraph 4 - The tax established in clause VI of this article:
I - shall be progressive and have their rates determined in such a manner as to discourage the retention of unproductive real property;
II - shall not be levied on small tracts of land, as defined in law, when explored by a proprietor who owns no other real property;
III - shall be audited and collected by the municipalities which so opt, in the manner prescribed by law, as long as that this option does not imply reduction of taxes or any other means of tax renounce.

Paragraph 4 reworded and amended by CA 42, December 19th 2003. The main modification was the inclusion of the possibility of the municipalities to take over the collection of this tax. The Federal government is the original competent body to collect this tax, but has no resources to do it. The original text read: "Paragraph 4 - The tax established in item VI shall have its rates determined in such a manner as to discourage the retention of unproductive real property and shall not be levied on small tracts of land, as defined in law, when a proprietor who owns no other real property explores them by himself or with his family."

Paragraph 5 - Gold, when defined in law as a financial asset or an exchange instrument, is subject exclusively to the tax established in item V of the caption of the present article, due on the original transaction; the minimum rate shall be one per cent, and the transference of the amount collected is ensured under the following terms:
I - thirty per cent to the state, the Federal District or the territory, depending on the origin;
II - seventy per cent to the municipality of origin.

Article 154. The Union may institute:
I - by means of a supplementary law, taxes not instituted in the preceding article, provided that they are non-cumulative and not founded on a taxable event or an assessment basis reserved for the taxes specified in this Constitution;
II - in the imminence or in the event of foreign war, extraordinary taxes, encompassed or not by its power to tax, which shall be gradually suppressed when the causes for their institution have ceased.

SECTION IV - STATE AND FEDERAL DISTRICT TAXES

Article 155. The states and the Federal District shall have the competence to institute taxes on:

Article 155, text in purple added by CA 3, March 17th 1993. The original text remitted the institution of taxes to a clause, and another clause mentioned the possibility of creation of an additional tax of 5% on the income tax; the amended text revoked the additional tax, and brought the mention to taxes to the caption.

I - transfer by death and donation of any property or rights:
II - transactions relating to the circulation of goods and to the rendering of interstate and intermunicipal transportation services and services of communication, even when such transactions and renderings begin abroad;
III - ownership of automotive vehicles.

CA 3, March 17th 1993, turned the letters a, b, and c of the former clause I into the clauses I, II and III of the caption of article 155.
Because of this CA, there were minor changes in the text of the paragraphs below, to adjust references to clauses and letters.

Paragraph 1 - The tax established in item I:
I - regarding real property and the respective rights, is within the competence of the state where the property is located, or of the Federal District;
II - regarding bonds, titles and credits, is within the competence of the Federal District or of the state where the probate or enrollment is processed, or where the donor is domiciled;
III - a supplementary law shall regulate the competence for the institution of such tax:
a) if the donor is domiciled or residing abroad;
b) if the deceased owned property, was resident or domiciled or had his probate processed abroad;
IV - the Federal Senate shall establish the maximum rates for such tax.
Paragraph 2 - The tax established in item II shall observe the following:
I - it shall be non-cumulative, and the tax due in each transaction concerning the circulation of goods or rendering of services shall be compensated by the amount charged in the previous transactions by the same or by another state or by the Federal District;
II - exemption or non-levy, except as otherwise determined in the law:
a) shall not imply credit for compensation relative to the amount due in the subsequent transactions or renderings of services;
b) shall cause the annulment of the credit for the previous transactions;
III - it may be selective, based on the essentiality of the goods or services;
IV - a resolution of the Federal Senate, on the initiative of the President of the Republic or of one-third of the Senators, approved by the absolute majority of its members, shall establish the rates that apply to interstate and export transactions and rendering of services;
V - the Federal Senate may:
a) establish minimum rates for domestic transactions, by means of a resolution on the initiative of one-third and approved by the absolute majority of its members;
b) establish maximum rates for the same transactions to settle a specific conflict involving the interest of the states, by means of a resolution on the initiative of the absolute majority and approved by two-thirds of its members:
VI - unless otherwise determined by the states and the Federal District, under the terms of the provisions of item XII, g, the domestic rates for transactions concerning the circulation of goods and the rendering of services may not be lower than those established for interstate transactions;
VII - the following shall be adopted for transactions and rendering of goods and services to end-users located in another state:
a) the interstate rate, when it is incumbent upon the recipient to pay that tax;
b) the internal rate, when it is not incumbent upon the recipient to pay that tax;
VIII - in the case of subitem a of the preceding item, the tax corresponding to the difference between the internal and the interstate rate shall be attributed to the state where the recipient is located;
IX - it shall also be levied:
a) on the entry of goods imported from abroad by an individual or a corporation, even if those are not usual taxpayers of such tax, whatever the finality of the goods, as well as on services rendered abroad, and the tax shall be attributed to the state where the establishment receiving the goods or services is located;

Clause IX, text in purple added by CA 33, December 11th 2001.

b) on the total value of the transaction, when goods are supplied with services not included in the power to tax of the municipalities;
X - it shall not be levied:
a) on transactions transferring industrialized products abroad, nor on services rendered to parties located abroad, ensured the maintenance and usage of the amount of such tax paid in previos operations and transactions;

Clause X, text in purple added by CA 42, December 19th 2002. The CA eliminated the Tax on Industrialized Products (IPI) which was factored into the prices of Brazilian goods, reducing their competitivity. The former text was more restrictive, reading "a) on transactions transferring industrialized abroad, excluding semi-finished products as defined in a supplementary law;

b) on transactions transferring petroleum, including lubricants liquid and gaseous fuels derived therefrom, and electric energy to other states;
c) on gold, in the cases defined in article 153, paragraph 5.
d) on rendering of communication services in the modes of radio broadcasting of sounds and of sounds and images with open and free reception;

Letter d added by CA 42, December 19th 2003.

XI - its assessment basis shall not include the amount of the tax on industrialized products when the transaction carried out bets ween taxpayers and concerning a product intended for industrialization or sale represents a taxable event for both taxes;
XII - A supplementary law shall:
a) define its taxpayers;
b) provide for tax substitution;
c) regulate the system of tax compensation
d) establish, for purposes of collection of the tax and definition of the responsible establishment, the location of the transactions concerning the circulation of goods and the rendering of services;
e) exclude from levy of the tax, in exports to other countries, services and other products other than those mentioned in item X, a;
f) provide for the event of maintenance of a credit for services and goods remitted to another state and exported to other countries;
g) regulate the manner in which, through deliberation by the states and the Federal District, tax exemptions, incentives and benefits shall be granted and revoked;
h) to define the fuels and lubricants which shall be levied only once, whatever their finality, in which case the provisions of clause X, B, shall not apply;
i) define the assessment bases, in such a way that it comprises the value of the tax, also in the importation from abroad of goods or services.

Letters h and i added by CA 33, December 11th 2001.

Paragraph 3 - With the exception of the taxes mentioned in item II of the caption of the present article, and article 153, I and II, no other tax may be levied on transactions concerning electric energy, telecommunication services, petroleum by-products, fuels and minerals of the country.
Paragraph 4. In the case of clause XII, h, the following provisions must be observed:
I - in operations with lubricants and fuels derived from petroleum, the tax shall belong to the State where the consumption occurs;
II - in inter State operations, between taxpayers, regarding natural gas and by-products, and lubricants and fuels not included in clause I of this paragraph, the tax shall be split between the States of origin and destination, adopting the same proportionality which applies to the operations with other goods;
III - in inter State operations regarding natural gas and by-products, and lubricants and fuels not included in clause I of this paragraph, when the product is purchased by non-taxpayers, the tax shall belong to the State of origin;
IV - the rates of the tax shall be defined by decision of the States and the Federal District, according to the provisions of paragraph 2, XII, g, and with observance of the following:
a) shall be uniform across all national territory, allowed differences by product;
b) may be specific, per unit of measure adopted, or ad valorem, levied on the amount of the transaction or on the the value that the product or a similar would fetch in a free competition market;
c) may be decreased and re-established, the provisions of article 150, III, b not being applicable.

Paragraph 4 added by CA 33, December 11th 2001.
Paragraph 5. The norms necessary to the application of provisions of paragraph 4, including those regarding the assessment and destination of the tax, shall be established by decision of the States and the Federal District, according to the provisions of paragraph 2, XII, g.

Paragraph 5 added by CA 33, December 11th 2001.
Paragraph 6. The tax mentioned in clause III:
I - shall have minimum rates established by the Federal Senate;
II - may have different rates, depending on its nature and utilization.

Paragraph 6 added by CA 42, December 19th 2003. Clause II allows that, for example, an ambulance have a lower tax than an ordinary car.

SECTION V - MUNICIPAL TAXES

Article 156. The municipalities shall have the competence to institute taxes on:
I - urban buildings and urban land property;
II - inter vivos transfer, on any account, by onerous acts, of real property, by nature or physical accession, and of real rights to property, except for real security, as well as the assignment of rights to the purchase thereof;
III - services of any nature not included in article 155, II, as defined in a supplementary law.
IV - (revoked)

The CA 3, March 17th 1993, revoked the former clause III, and turned clause IV into the current clause III. The former clause III read: "III - retail sale of liquid and gaseous fuels, except diesel oil." The supplementary law mentioned by clause III is Supplementary Law 116, July 31st 2003, which regulates the Tax on Services of Any Nature.

Paragraph 1 - Without prejudice of the progressivity based on time mentioned by article 182, paragraph 4, II, the tax of clause I may:
I - be progressive in proportion to the value of the building;
II - have different rates, in accordance with the localization and the use of the building.

Paragraph 1 amended by CA 29, September 13th 2000. Original text read: "The tax set forth in item I may be progressive, under the terms of a municipal law, in order to ensure achievement of the social function of the property."

Paragraph 2 - The tax set forth in item II:
I - shall not be levied on the transfer of goods or rights incorporated into the assets of a corporate body to pay up its capital, nor on the transfer of goods or rights resulting from the merger, incorporation, division or dissolution of corporate bodies, unless, in such cases, the predominant activity of the purchaser is the purchase and sale of such goods or rights, the lease of real property or leasing;
III - is within the competence of the municipality where the property is located.
Paragraph 3 - As regards the tax established in item III of the caption of this article, a supplementary law shall:

Text in purple added by CA 37, June 12th 2002.

I - establish its maximum and minimum rates;

Text in purple added by CA 37, June 12th 2002.

II - exclude exportations of services to other countries from levy of the said tax.
III - regulate the manner and the conditions by which exemptions, incentives and fiscal benefits shall be granted and revoked.

Clause III added by CA 37, June 12th 2002. Check also the article 88 of the Temporary Provisions, which was also amended by this same CA.

SECTION VI - TAX REVENUE SHARING

Article 157. The following shall be assigned to the states and to the Federal District:
I - the proceeds from the collection of the federal tax on income and earnings of any nature, levied at source on income paid on any account by them, by their autonomous government entities and by the foundations they institute and maintain;
II - twenty per cent of the proceeds from the collection of the tax that the Union may institute in the exercise of the powers conferred on it by article 154, I.

Article 158. The following shall be assigned to the municipalities:
I - the proceeds from the collection of the federal tax on income and earnings of any nature, levied at source on income paid on any account by them, by their autonomous government entities and by the foundations they institute and maintain;
II - fifty per cent of the proceeds from the collection of the federal tax on rural property, concerning real property located in the municipalities, or the totality of the proceeds, in case the municipality exercizes the option mentioned by article 153, paragraph 4, III;

Clause II, text in purple appended by CA 42, December 19th 2003.

III - fifty per cent of the proceeds from the collection of the state tax on the ownership of automotive vehicles licensed in the municipalities;
IV - twenty-five per cent of the proceeds from the collection of the state tax on transactions regarding the circulation of goods and on rendering of interstate and intermunicipal transportation services and services of communication.
Sole paragraph - The revenue portions assigned to the municipalities, as mentioned in item IV, shall be credited in accordance with the following criteria:
I - at least three-fourths, in proportion to the value added in the transactions regarding the circulation of goods and the rendering of services carried out in the territory of the municipalities;
II - up to one-quarter, in accordance with the provisions of a state law or, in the case of the territories, of a federal law.

Article 159. The Union shall remit:
I - of the proceeds from the collection of taxes on income and earnings of any nature and on industrialized products, forty-seven per cent as follows:
a) twenty-one and a half of one per cent to the Revenue Sharing Fund of the States and of the Federal District;
b) twenty-two and a half of one per cent to the Revenue Sharing Fund of the Municipalities;
c) three per cent, for application in programs to finance the productive sector of the North, Northeast and Centre-West Regions, through their regional financial institutions, in accordance with regional development plans, the semi-arid area of the Northeast being ensured of half of the funds intended for that Region, as provided by law;
II - of the proceeds from the collection of the tax on industrialized products, ten per cent to the states and to the Federal District, in proportion to the value of the respective exportations of industrialized products.
III - of the proceeds from the colection of the contribution of intervention in the economic order established in article 177, paragraph 4, 29% (twenty-nine percent) to the States and the Federal District, distributed as defined by law, with due regards to the destination as provided by the clause II, c, of the mentioned article;

Clause III added by CA 44, June 30th 2004.

Paragraph 1 - For purposes of calculating the amount to be remitted in accordance with the provisions in item I, the portion of the collected tax on income and earnings of any nature assigned to the states, to the Federal District and to the municipalities shall be excluded, as provided by articles 157, I, and 158, I.
Paragraph 2 - No federated unit may be allocated a portion in excess of twenty per cent of the amount referred to in item II, and any excess shall be distributed among the other participants, maintaining, for the latter, the apportionment criterion established therein.
Paragraph 3 - The states shall remit twenty-five per cent of the funds they may receive as provided by item II to the respective municipalities, observing the criteria established in article 158, sole paragraph, I and II.
Paragraph 4. Of the amount determined by clause III which belongs to each State, twenty-five percent shall be remitted to the respective municipalities, in the manner established by the law mentioned in said clause.

Paragraph 4 added by CA 42, December 19th 2003.

Article 160. It is forbidden to withhold or to make any restriction to the remittance and use of the funds assigned in this section to the states, to the Federal District and to the municipalities, including any tax additions and increases.
Sole paragraph - The prohibition mentioned in the present article does not prevent the Union and the States from conditioning the remitting of funds to:
I - the payment of credits, including those owned by the autarchies;
II - the fullfilment of the provisions of article 198, paragraph 2, II and III.

Sole paragraph amended by CA 29, September 13th 2000.

Article 161. A supplementary law shall:
I - define the added value for the purposes provided by article 158, sole paragraph, I;
II - establish rules for the remittance of the funds referred to in article 159, especially the criteria for the sharing of the funds set forth in its item I, seeking to promote social and economic balance among states and among municipalities;
III - provide for the monitoring, by the beneficiaries, of the calculation of the quotas and release of the participations set forth in articles 157, 158 and 159.
Sole paragraph - The Federal Court of Accounts shall calculate the quotas referring to the participation funds mentioned in item II.

Article 162. The Union, the states, the Federal District and the municipalities shall announce, on or before the last day of the month following that of collection, the amounts of each of the tributes collected, the funds received. the tax sums remitted and to be remitted and the numerical expression of the apportionment criteria.
Sole paragraph - The data announced by the Union shall be discriminated by state and by municipality; those of the states, by municipality.

CHAPTER II - PUBLIC FINANCES

SECTION I - GENERAL RULES

Article 163. A supplementary law shall make provisions for: I - public finances;
II - foreign and domestic public debt, including the debt of the autonomous government agencies, foundations and other entities controlled bv the Government;
III - granting of guarantees by government entities;
IV - issuance and redemption of public debt bonds;
V - financial supervision of the direct and indirect public administration;

Clause V amended by CA 40, May 29th 2003. Original text read: "V - supervision of financial institutions;"

VI - foreign exchange transactions carried out by bodies and agencies of the Union, of the states, of the Federal District and of the municipalities;
VII - compatibility of the functions of the official credit institutions of the Union, safeguarding all the characteristics and full operational conditions of those intended for regional development.

Article 164. The competence of the Union to issue currency shall be exercised exclusively by the central bank.
Paragraph 1 - It is forbidden for the central bank to grant, either directly or indirectly, loans to the National Treasury and to any body or agency which is not a financial institution.
Paragraph 2 - The central bank may purchase and sell bonds issued by the National Treasury, for the purpose of regulating the money supply or the interest rate.
Paragraph 3 - The cash assets of the Union shall be deposited at the central bank, those of the states, of the Federal District, of the municipalities and of the bodies or agencies of the Government and of the companies controlled by the same, at official financial institutions, excepting the cases established in law.

SECTION II - BUDGETS

Article 165. Laws of the initiative of the Executive Power shall establish:
I - the pluriannual plan;
II - the budgetary directives;
III - the annual budgets.
Paragraph 1 - The law which institutes the pluriannual plan shall establish, on a regional basis, the directives, objectives and targets of the federal public administration for the capital expenditures and other expenses resulting therefrom and for those regarding continuous programmes.
Paragraph 2 - The law of budgetary directives shall comprise the targets and priorities of the federal public administration, including the capital expenditures for the subsequent fiscal year, shall guide the drawing up of the annual budget law, shall make provisions for alterations in tax legislation and shall establish the investment policy for the official development financing agencies.
Paragraph 3 - The Executive Power shall, within thirty days after the closing of each two-month period, publish a summarized report on budget implementation.
Paragraph 4 - The national, regional and sectorial plans and programmes set forth in this Constitution shall be drawn up in compliance with the pluriannual plan and shall be examined by the National Congress.
Paragraph 5 - The annual budget law shall include:
I - the fiscal budget regarding the Powers of the Union, their funds, bodies and entities of the direct and indirect administration, including foundations instituted and maintained by the Government;
II - the investment budget of companies in which the Union directly or indirectly holds the majority of the voting capital;
III - the social welfare budget, comprising all direct and indirect administration entitles or bodies connected with social security, as well as funds and foundations instituted and maintained bv the Government.
Paragraph 6 - The budget bill shall be accompanied by a regionalized statement on the effect on revenues and expenses, deriving from exemptions, amnesties, remissions, subsidies and benefits of a financial, tributary and credit nature.
Paragraph 7 - The functions of the budgets set forth in paragraph 5, I and II, of the present article, compatible with the pluriannual plan, shall include the function of reducing interregional inequalities, according to populational criteria.
Paragraph 8 - The annual budget law shall not contain any provision extraneous to a forecast of revenues and to the establishment of expenses, such prohibition not including authorization to open supplementary credits and to contract credit transactions, even if by advance of revenues, under the terms of the law.
Paragraph 9 - A supplementary law shall:
I - make provisions for the fiscal year, effectiveness, terms, drawing up and organization of the pluriannual plan, of the law of budgetary directives and of the annual budget law;
II - establish rules for the financial and property management of the direct and indirect administration, as well as conditions for the institution and operation of funds.

Article 166. The bills regarding the pluriannual plan, the budgetary directives, the annual budget and the additional credits shall be examined by the two Houses of the National Congress, in accordance with their common regulations.
Paragraph 1 - It is incumbent upon a permanent joint committee of Senators and Deputies to:
I - examine and issue its opinion on the bills referred to in the present article and on the accounts submitted annually by the President of the Republic;
II - examine and issue its opinion on the national, regional and sectorial plans and programmes established in this Constitution, and exercise budgetary monitoring and supervision, without affecting the operation of the other committees of the National Congress and of its Houses, created in accordance with article 58.
Paragraph 2 - Amendments shall be submitted to the joint committee, which shall report on them. and shall be examined, in accordance with the regulations, by the Plenary Session of the two Houses of the National Congress.
Paragraph 3 - Amendments to the bill of the annual budget or to the bills which modify it may only be approved if:
I - they are compatible with the pluriannual plan and with the law of budgetary directives;
II - they specify the necessary funds, allowing only those resulting from the annulment of expenses, and excluding those which apply to:
a) allocations for personnel and their charges;
b) debt servicing;
c) constitutional tax transfers to the states, the municipalities and the Federal District; or
III - they are related:
a) to the correction of errors or omissions; or
b) to the provisions of the text of the bill of law.
Paragraph 4 - Amendments to the bill of budgetary directives may not be approved if they are incompatible with the pluriannual plan.
Paragraph 5 - The President of the Republic may send a message to the National Congress to propose modifications in the bills referred to in the present article as long as the joint committee has not started to vote on the part for which an alteration is being proposed.
Paragraph 6 - The bills of the pluriannual plan law, of the law of budgetary directives and of the annual budget law shall be forwarded by the President of the Republic to the National Congress, under the terms of the supplementary law referred to in article 165, paragraph 9.
Paragraph 7 - The other rules regarding legislative procedure shall apply to the bills mentioned in this article, as long as they are not contrary to the provisions of this section.
Paragraph 8 - Any funds which, as a result of a veto, amendment or rejection of the bill of the annual budget law, have no corresponding expenses, may be allocated, as the case may be, by means of special or supplementary credits, with prior and specific legislative authorization.

Article 167. The following are forbidden:
I - to begin programmes or projects not included in the annual budget law;
II - to incur expenses or to assume direct obligations which exceed the budgetary or additional credits;
III - to carry out credit transactions, which exceed the amount of capital expenses, excepting those authorized by means of supplementary or special credits with a specific purpose and approved by an absolute majority of the Legislative Power;
IV - to bind tax revenues to an agency, fund or expense, excepting the sharing of the proceeds from the collection of the taxes referred to in articles 158 and 159, the allocation of funds for the public actions and services of health, for the maintenance and development of education, as determined, respectively, by articles 198, paragraph 2, 212 and 37, XXII and the granting of guarantees on credit transactions by advance of revenues, as established in article 165, paragraph 8, as well as in paragraph 4 of the present article;

Clause IV amended by CA 42, December 19th 2003. The CA permitted the binding of funds to health needs, as it did with education.

V - to open a supplementary or special credit without prior legislative authorization and without specification of the corresponding funds;
VI - to reassign, reallocate or transfer funds from one programming category to another or from one agency to another without prior legislative authorization;
VII - to grant or use unlimited credits;
VIII - to use, without specific legislative authorization, funds from the fiscal and social security budgets to supply a necessity or to cover a deficit of companies, foundations and funds, including those mentioned in article 165, paragraph 5;
IX - to institute funds of any nature without prior legislative authorization.
X - the voluntary transfer of funds and the granting of loans, including the cases of proceeds advance, by the Federal and State government and their financial institutions, for payment of expenditures with personal, retired and pensionists of the States, Federal District and municipalities;

Clause X added by CA 19, June 4th 1998.
XI - the utilization of proceeds from the social contributions subject of article 195, I,a, and II, for the realization of expenditures other than the payment of benefits of the general regime of social security established by article 201.

Clause XI added by CA 19, June 4th 1998.

Paragraph 1 - No investment whose execution exceeds one fiscal year may be implemented without prior inclusion in the pluriannual plan, or without a law to authorize such inclusion, subject to crime of malversation.
Paragraph 2 - Special and extraordinary credits shall be effective in the fiscal year in which they are authorized, unless the authorization act is enacted during the last four months of that fiscal year, in which case, reopened within the limits of their balances, such credits shall be incorporated into the budget of the subsequent fiscal year.
Paragraph 3 - The opening of extraordinary credit may only be allowed to meet unforeseeable and urgent expenses, such as those resulting from war, internal commotion or public calamity, observing the provisions in article 62.
Paragraph 4 - It is permitted to bind proper revenues generated by the taxes referred to in articles 155 and 156 and the funds mentioned in articles l57, 158 and 159, I, a and b, and II, to the granting of a guarantee or a counterguarantee to the Union, and to the payment of debits owed to the same.

Paragraph 4 added by CA 3, March 17th 1993.

Article 168. The funds corresponding to the budgetary allocations, including the supplementary and special credits, intended for the bodies of the Legislative and Judicial Powers and for the Public Prosecution and the Public Legal Defense, shall be remitted to them on or before the twentieth of each month, in twelfths, as provided by the supplementary law referred to in article 165, paragraph 9.

Article 168, text in purple added by CA 45, December 8th 2004.

Article 169. Expenditure with active and pensioned personnel of the Union, the states, the Federal District and the municipalities may not exceed the limits established in a supplementary law.

Article 169 was radically changed by CA 19, June 4th 1998. This CA changed much of the legislation regarding the civil service. This article imposed to States and municipalities the obligation to cut expenditures with salaries, retirement payments and pensions, as necessary to keep the ratio between expenses and revenues within certain limits. The supplementary law mentioned by this article is Suplemmentary Law 101, May 4th 2000, which became known as Fiscal Responsibility Law (Lei de Responsabilidade Fiscal).

Paragraph 1 - The granting of any advantage or increase of remuneration, the creation of offices or alteration of career structures, as well as admission of personnel, on any account, by bodies and entities of the direct or indirect administration, including foundations instituted and maintained by the Government, may only be effected:
I - if there is a prior budgetary allocation sufficient to cover the estimated expenditure with personnel and the increases resulting therefrom;
II - if there is specific authorization in the law of budgetary directives, excepting the public and the mixed-capital companies.

CA 19, June 4th 1998, changed the former Sole paragraph to paragraph 1, without changing text.
Paragraph 2. Elapsed the time set forth by the supplementary law mentioned by this article for compliance with the limits estabished by said law, the remittance of federal or State funds to the States, Federal District or municipalities which do not comply with the limits shall be immediately suspended.
Paragraph 3. For compliance with the limits established in accordance with this article, during the time determined by the supplementary law mentioned by the caption of this article, the Union, the States, the Federal District and the municipalities shall adopt the following measures:
I - reduction of at least 20% (twenty per cent) of expenditures with comissioned offices and trusting positions;
II - dismissal of non-tenured servants.
Paragraph 4. If the measures adopted in accordance with paragraph 3 do not suffice to assure compliance with the provisions of the supplementary law mentioned by this article, the tenured servants may loose their offices, provided that the justified normative act of each of the Powers specifies the functional activity, the body or administrative unity subject to reduction in personnel.
Paragraph 5. The civil servant who looses office as per paragraph 4 shall be entitled to an indemnization of one monthly remuneration per year in office.
Paragraph 6. The office subject to reduction in accordance of the former paragraphs shall be considered extinct, the creation of office, position or function with equal or similar assignments being forbidden for the next 4 (four) years.
Paragraph 7. Federal law shall provide for the general rules to be obeyed in the effectivation of the provisions of paragraph 4.

Paragraphs 2 to 7 added by CA 19, June 4th 1998. All these paragraphs had the goal of reducing the share of the budget spent with salaries of the civil servants. This problem affected more seriously some States and municipalities; even so, with support on these paragraphs, and to give an example, the Federal Government didn´t give any linear raise to the civil servants from 1995 to 2001. Most States followed the example and also didn´t grant any raise in salaries. In the smaller municipalities, most servants are still paid minimum salary, which has yearly adjustments. As a whole, most States and municipalities managed to comply with the supplementary law without being obliged to dismiss servants or extinguish offices.