Tax Lapse — 5-year limit to assess (decadência)
Tax lapse (decadência) is the 5-year period the tax authorities have to constitute a tax liability through assessment (lançamento). Once the period expires, the right to assess lapses — a tax that has not been assessed can no longer be demanded. It is governed by articles 173 and 150, §4 of the Brazilian Tax Code (CTN).
Start of the lapse period
The CTN establishes two counting rules, depending on the type of assessment:
- General rule (article 173, I): 5 years counted from the first day of the fiscal year following the one in which the assessment could have been made. Applicable to assessments by the authorities (ex officio) or based on a declaration.
- Self-assessment / assessment by homologation (article 150, §4): 5 years counted from the taxable event, provided the taxpayer has paid some amount. With no payment at all, the general rule of article 173, I applies.
Practical example: PIS/COFINS (self-assessed federal contributions) has a 5-year lapse from the taxable event if there was partial payment. With zero payment, the rule shifts to article 173, I (5 years from the following fiscal year) — extending the period in the tax authorities’ favor.
Grounds for extension and interruption
- Willful misconduct, fraud or simulation (article 173, II): the lapse period runs from the final decision that annuls the assessment for a formal defect — in practice, this can extend the period indefinitely.
- Notice preparatory to assessment (article 173, sole paragraph): any measure indispensable to the assessment INTERRUPTS the lapse period.
- Prior assessment annulled: a new 5-year period begins from the final decision that annulled it.
Defending against an audit requires a technical review of the lapse period — an assessment covering a period that has already lapsed should be raised from the initial challenge.
Frequently asked questions about tax lapse
What is the difference between tax lapse (decadência) and tax prescription (prescrição)?
LAPSE (decadência) is the period for the tax authorities to CONSTITUTE the tax liability through assessment (5 years) — it runs before the assessment. PRESCRIPTION (prescrição) is the period for the authorities to COLLECT, through the courts, a liability ALREADY CONSTITUTED (5 years counted from final constitution) — it runs after the assessment. Both have a 5-year period, but at distinct moments.
Can I recover a tax paid after the lapse period?
Yes. The taxpayer has 5 years to request a refund of tax paid in error (CTN, article 168), a period independent of the authorities’ lapse. Paid in 2021 → I can request a refund until 2026. After 5 years, the right to recovery prescribes (it does not lapse).
Is an assessment made after the lapse period void?
Yes. An assessment made after the lapse period is void as a matter of law and can be raised at any stage of the proceeding (administrative or judicial). In an audit, the lapse argument should be made from the first challenge — the sooner, the better.
Is there a different lapse rule for the reform taxes (CBS/IBS)?
Complementary Law 214/2025 maintains the general 5-year lapse rule for CBS and IBS, aligned with the CTN. Operational specifics may arise depending on secondary regulation — the initial 2026-2027 period may have specific transitional rules.