Tax benefits for agriculture in the Tax Reform are validated by the STF

Tax benefits for agriculture in the Tax Reform are validated by the STF

By Eduardo Lourenço

On December 18, 2025, the Federal Supreme Court judged the first direct unconstitutionality action filed against Tax Reform provisions: ADI 7755, proposed by the Green Party against the clauses of CONFAZ Agreement nº 100/1997 and against art. 9th, § 1st, item The political party, which instructed its parliamentarians to vote in favor of maintaining the text when voting on the reform in the Chamber of Deputies, alleged damage to the environment and health. By majority, under the editorship of minister Cristiano Zanin, the Plenary judged the action entirely unfounded, in a joint judgment with ADI 5553. The ruling, with 264 pages, was now published in April 2026.

More than an expected result, the decision has an inescapable symbolic weight: it is the STF's first statement on Tax Reform. Due to the very nature of Agro's centrality in the national economy, which was correctly understood by the derived constituent, the Court could not act in any other way than shielding the legitimate political choice: to preserve, in the new system, reduced taxation for inputs that support food production in Brazil.

The analysis could have been purely formal, after all, art. 9th, § 1st, But the winning position went further: it expressly recognized the structural function of agriculture, both due to its economic weight and the humanitarian dimension associated with food security and the right to food.

This was no coincidence. The leading vote relied heavily on the information brought by the sector's amici curiae (AMA Brasil, Abisolo, Sindiveg, CNA, CropLife, Abifina, Fiesp, Fiemg, Abdagro and Aprosoja) and on a technical note from the Legal Consultancy of the Ministry of Agriculture (Conjur/MAPA). It was from this plural set of manifestations that the understanding was consolidated in the trial, in the words of Minister Zanin, that agricultural inputs are “essential technical inputs for contemporary agriculture”, aimed at “reducing food production costs, avoiding significant increases in prices paid by Brazilian consumers and maintaining the country's international competitiveness in the agricultural sector”.

Elements that reveal the scale of what was at stake were incorporated into the ruling. Based on MAPA's technical note, the leading vote recorded that the demand for pesticides is inelastic, so that any increase in taxation does not reduce use, it only makes food more expensive and stimulates the illegal market. It also noted that the withdrawal of the benefits of Agreement 100/97 and zero IPI would generate an additional cost estimated at R$19.5 billion per harvest, equivalent to 16% of the total cost of the main crops.

It was also established, based on technical studies, that, without agricultural pesticides, Brazilian production would suffer a reduction of up to 50% and it would be necessary to practically double the cultivated area to maintain the current level. This would imply the incorporation of areas currently covered by forests, on a collision course with the environmental preservation invoked by the initial statement itself. A study by CEPEA/ESALQ-USP, also cited in the leading vote, projected a 34% decrease in the production of soybeans, corn and cotton, in addition to an increase in domestic prices.

These numbers have a common denominator: they came from the amici demonstrations. The Court not only recognized the role of agriculture, but used agricultural data to support the decision – this is clearly the effectiveness of art. 187 of the Federal Constitution. A victory for the technical debate and the organized action of the sector before the Court, which was born, in truth, in the institutional dialogue held at the National Congress.

To exemplify what was said, three manifestations stand out. Initially, Sindiveg demonstrated that the EC 132/23 provision is a rule of limited effectiveness, which does not, in itself, grant any favored treatment, and bluntly exposed the regulatory rigor of IBAMA, Anvisa and MAPA in the registration of pesticides. The point made the Court reject the narrative that the tax benefit would be equivalent to an environmental carte blanche.

Afterwards, Abisolo and AMA Brasil, in turn, brought two decisive theses. The first: surcharging the regular product only strengthens the illegal market, generating the opposite effect to that intended. The second, even more relevant for the future: in the logic of non-fulfillment of IBS and CBS, the reduced rate on inputs is not a revenue waiver and does not generate a competitive advantage. What is paid less is now credited less in the next stage: the net result is the same. In fact, in practice and legally, they cannot even be considered tax benefits (especially when talking about deferral).

In fact, the neutrality thesis was incorporated by the decision by stating, in all letters, that IBS and CBS were conceived as taxes with an essentially fiscal profile. When anticipating the vote, Minister Zanin highlighted “in my understanding, the reduction in the rate for pesticides would not pursue extra-fiscal purposes, nor is it guided by essentiality or selectivity, but rather by the preservation of tax neutrality, as was also sought by the reform I just mentioned”. In other words, for the first time, the STF endorsed the logical design of the reform itself (and did so, to a large extent, based on the theses constructed by agriculture).

Therefore, three messages remain from the judgment. First, the STF removed the legal uncertainty regarding agricultural tax benefits in the new system: the 60% reduction in IBS and CBS rates for agricultural inputs is constitutional and is supported by the very logic of the reform.

Second, the Court inaugurated a clear institutional stance for the next chapters of the reform: the control of the constitutionality of fiscal choices widely debated in Congress: especially when supported by clauses on development, food security and agricultural policy (arts. 3, II, 6 and 187 of the CF), it will be limited to the offense to immutable clauses, not the subjective preference of the judge. In fact, it is worth mentioning, according to the drafting minister, “that this tax incentive policy was the subject of new deliberation by the National Congress based on a constitutional amendment that ratified this tax incentive policy for pesticides, showing that the National Congress, based on its shaping power, saw fit to ratify or confirm the need for a tax incentive policy, not with the objective, as I said, of encouraging the use of pesticides, but rather of satisfying the country's needs in relation to its use and impacts. that this use has in the food chain and in other values. Therefore, this also seems to me to be quite relevant in the analysis of the unconstitutionality brought here.”

Third, and perhaps most important: the judgment shows that the agro was read based on the facts and figures, and that the facts and figures only reached the Court because the sector organized itself to take them. In times of reform in the testing phase, technical action as amicus curiae stopped being supporting and became, literally, a chapter of the ruling.

In the first judgment on the Tax Reform, an institutionally relevant point was recognized: the centrality of agriculture does not arise from sectoral rhetoric, but from its objective link to food security, economic development and the constitutionally protected agricultural policy itself. The ruling did not ignore environmental and health concerns. On the contrary, it expressly faced them and concluded that, in this case, the constitutionally adequate solution was not to invalidate the tax policy, but to make production, regulation and control compatible.

The practical consequence of this understanding is clear. For agriculture to preserve its strategic position in the new tax system, public policies aimed at the sector must continue to be formulated with the effective participation of economic agents and in accordance with the Constitution. This involves financing, insurance, logistics, legal security, rational tax discipline and also technical inspection, regulatory assessment and compliance with environmental and health legislation. It was precisely this balance, and not an unrestricted release, that the Supreme Court recognized in the trial.

The new tax system approved by EC 132/23 brought important safeguards for agriculture, built during the legislative process thanks to the firm action of the Congressmen of the Parliamentary Front for Agriculture. It was this work, carried out within the National Congress's own shaping space, that allowed the incorporation of solutions compatible with the reality of the sector. When judging ADI 7755, the Judiciary confirmed the legitimacy of one of the legislative constructions introduced and recognized that it harmonizes with the constitutional logic of the reform.

By Eduardo Lourenço, partner at Maneira Advogados; doctor and master in Constitutional Law; LLM in Tax Law.