By Manassés Lopes

IDP Ambassador

A family discovers that their retired father, diagnosed with Alzheimer's years ago, continued paying income tax on his pension all this time. The lawyer faces a twofold question: Is it possible to stop paying from now on, and is it possible to recover what has already been withheld? 

Income tax exemption due to serious illness is one of the most frequent requests in individual tax litigation, and also one of the most frequently lost due to drafting errors. The Superior Court of Justice has already established clear requirements, and most defeats do not stem from the merits of the case, but from how the evidence and the starting date are handled at the lower court.

Understanding this framework is what separates a successful application from one that fails due to admissibility issues or recovers only a fraction of what would be possible. And there's one point, the initial date, that often proves costly for those who ignore it.

What does the law exempt and who is entitled to it?

The basis for this is found in Article 6, item XIV, of Law 7.713/1988 , which exempts from income tax the retirement, disability, or pension benefits received by individuals suffering from certain serious illnesses, including mental illness, malignant neoplasm, severe heart disease, and blindness.

Two specific points defined in repetitive appeals delimit the scope of the benefit. In Topic 250, when judging REsp 1.116.620, the Superior Court of Justice (STJ) established that the list of illnesses in the provision is exhaustive, so the exemption does not extend to diseases not foreseen therein. And in Topic 1.037, in REsp 1.814.919, it established that the exemption only applies to those suffering from these illnesses who are retired, conditioning the benefit on the nature of the income.

Alzheimer's disease is not explicitly listed, but when it progresses to a state of mental incapacity, it falls under the legal definition. Therefore, the Superior Court of Justice (STJ) recognizes the right to income tax exemption for individuals with Alzheimer's disease whose illness has progressed to mental incapacity, as seen in AgInt in REsp 2.082.632 and REsp 2.152.178.

The requirements that the Superior Court of Justice (STJ) demands for income tax exemption.

Based on case law, recognition of the benefit depends on cumulative requirements, and each of them guides the evidence to be produced.

• The taxpayer must receive retirement, pension, or disability benefits. The exemption does not cover income from active employment, as per Ruling 1.037.
• The illness must be included in the exhaustive list of Article 6, item XIV, of Law 7.713/1988, or fall under its scope, such as Alzheimer's disease that progresses to mental alienation.
• Proof of illness does not depend on an official medical report. According to Precedent 598 of the Superior Court of Justice (STJ), granting the exemption can be based on the judge's reasoned conviction, derived from the evidence in the case file, including expert reports and private medical documentation.
• The start date for the benefit corresponds to the date on which the serious illness was proven, and not to the date of the administrative request or the official report.

This last requirement deserves extra attention, because it is where most disputes are concentrated and where the amount to be refunded is effectively defined.

The initial term and the wall of Summary 7

The most sensitive practical question is not whether the right exists, but rather when it began. The further back the starting point, the greater the restitution of amounts collected in the past. And here the taxpayer faces a technical obstacle that is often underestimated.

The Superior Court of Justice (STJ) sets the starting point based on the evidence produced in the lower courts. In Special Appeal No. 2.152.178, the court of origin had placed the beginning of the exemption on the date the illness manifested as mental alienation, and not on the earlier date of the Alzheimer's diagnosis. The attempt to advance this starting point in the special appeal was not considered because it would require a re-examination of facts and evidence, which is prohibited by Precedent 7 of the STJ. The same occurred in the Internal Appeal No. 2.057.555, where the starting point was set at the moment of the manifestation of mental alienation, and the attempt to move it back was barred by the same precedent.

The lesson is straightforward. The starting date for income tax exemption is determined in the first instance trial, not in the Superior Court of Justice (STJ). Anyone wishing to push back the starting date needs to include in the case file, from the beginning, reports and documents demonstrating the onset of the illness as early as possible. Those who handle this carelessly discover, too late, that the special court does not reopen the factual discussion.

Prescription, disability, and the 2015 milestone.

There is also a layer that can significantly extend the refundable period, but which requires extra care after a legislative change. The general rule subjects the restitution of undue payments to a five-year statute of limitations. However, against those who are absolutely incapable, no statute of limitations runs, which, in theory, would allow for the recovery of much older payments.

The delicate point is that the Statute of Persons with Disabilities, Law 13.146/2015, altered the legal framework for incapacities. Before it, a person with a mental disability lacking discernment was considered absolutely incapable, and the statute of limitations did not run against them. After 2015, these individuals began to be treated as relatively incapable, subject to the normal course of the statute of limitations. This is exactly what the Superior Court of Justice (STJ) recognized in the AgInt in REsp 2.057.555, where the non-running of the statute of limitations was valid because it referred to a period prior to the new regulations.

For the lawyer, the consequence is clear. The argument of imprescriptibility due to absolute incapacity holds true for contributions prior to 2015, but loses support for the period after that date. Mixing the two regimes offers the court an opening to reduce the scope of restitution.

In practice, the sum of these factors defines the size of the credit. For events after 2015, income tax exemption usually covers the five years prior to filing the lawsuit, while for those prior, the absence of the statute of limitations running against the legally incapacitated person can extend the recoverable period for much longer. Hence the importance of precisely dating both the onset of the illness and the beginning of the incapacity.

How do I incorporate the thesis statement into the petition?

Practical synthesis organizes these elements into a sequence of drafting decisions that a well-constructed request observes.

• To request a declaration of the non-existence of a legal-tax relationship that obligates the collection and restitution of amounts paid, demonstrating the status of retiree or pensioner and the inclusion of the illness within the legal scope.
• To prove the illness with the available evidence, without conditioning the request on an official medical report, expressly invoking STJ Precedent 598 to support the sufficiency of private and expert evidence.
• To set the starting date as the earliest date on which the serious illness or mental incapacity manifested itself, and to anchor that date in robust evidence at the first instance, because the Superior Court of Justice (STJ) will not review it later.
• Treat the statute of limitations according to the period, arguing that the time limit does not run only for contributions prior to 2015, when absolute incapacity applies.
• Evaluate the fee strategy. When the National Treasury acknowledges the validity of the claim, and there is administrative guidance to that effect for Alzheimer's, it is exempt from paying attorney's fees, pursuant to Article 19, paragraph 1, item I, of Law 10.522/2002, as recognized in the AgInt in REsp 2.125.253. This changes the economic calculation of the claim and, in certain cases, recommends exploring the administrative route first.

Mastering this procedure transforms a generic request into a calibrated demand, ensuring not only the right to exemption, but also the maximum restitution the case warrants.

The IDP postgraduate program in Tax Law

The case of the serious illness reveals what defines good tax advocacy. Knowledge of the exemption rule must go hand in hand with evidentiary strategy and mastery of admissibility obstacles, from the initial term to the statute of limitations. Those who separate substantive law from procedural technique lose recoverable value.

The IDP Postgraduate Program in Tax Law was designed to unite these plans at a time of transformation in the system. The program is organized into two axes: one on the constitutional foundations and structure of the tax system, already from the perspective of the Tax Reform, and another on practical application, planning and litigation, with tax liability, administrative tax proceedings, tax enforcement, and taxation of income, consumption, and assets. 

The faculty includes those who are at the forefront of these discussions, such as Tarsila Fernandes, PhD in Law, advisor to a Supreme Court Justice and federal prosecutor; Maysa Pittondo, PhD and former member of the CARF (Administrative Council for Tax Appeals); and Jules Queiroz, PhD in Law and legislative consultant for the Chamber of Deputies.

The classes are 100% online and live, held every two weeks, a format that fits the routine of those who practice law and study at the same time. 

Those who understand that income tax exemption due to serious illness is earned through the initial trial, and not by hoping for an appeal, are advocating with an advantage that directly translates into results for their client. 

Manassés Lopes da Silva is a lawyer and university professor. He holds a Master's degree in Law from IDP/SP, a specialization in Civil Procedural Law from IDP, and an LLM in Processes and Appeals in Superior Courts. Email: contato@manasseslopes.com