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Recently, Brazilian legal system underwent a significant reform due to the enactment of Law No. 14,905/2024, published on July 1, 2024. This Law amended, among other provisions, Articles 389 and 406 of Law No. 10,406/2002, the Brazilian Civil Code, and also to adopt the Selic rate, excluding the IPCA/IBGE index rate, as the default legal rate for late payment interest in cases where no agreement exists between the parties.
The enactment of Law No. 14,905, of 2024 represents a pivotal moment in Brazilian law, as it resolves a longstanding legislative and doctrinal dispute regarding the determination of late payment interest in the absence of explicit agreement. Previously, the legal framework lacked clarity, leaving room for two possible interpretations: one supports the application of a maximum rate of 1% per month under Article 161, paragraph 1 of the National Tax Code (CTN), while the other advocates for using the Selic rate as a standard for monetary adjustment.
In 2019, this debate reached the Superior Court of Justice of Brazil (STJ) via Special Appeal No. 1,795,982. The case centered on whether the rate of 1% per month or the Selic rate should prevail. In its decision, published on October 23, 2024, the STJ was inclined to conclude that the Selic rate should prevail. The majority of the court reasoned that the 1% rate under Article 161, paragraph 1 of the CTN pertains exclusively to tax-related debts, while Article 406 of the Civil Code specifically links default interest to the rate applicable for federal tax arrears—a role fulfilled by the Selic rate.
Given this uncertain scenario of legal uncertainty and aiming to harmonize interpretations, Law No. 14,905/2024 was enacted. The Law amended Articles 389 and 406 of the Civil Code, formally adopting the Selic rate—minus the IPCA index rate—as the default interest rate in cases without a contractual stipulation.
This new rule has been effective since September 2024. While the Law clarifies the applicable rate, it delegated the calculation methodology to the Central Bank of Brazil (Bacen). On August 29, 2024, Bacen issued National Monetary Council (CMN) Resolution No. 5,151, which specifies, in Article 2, the formula for calculating the legal rate. According to the resolution, the monthly Selic and IPCA-15 percentages from the preceding month should be used, applying simple interest for capitalization.
To facilitate compliance, Bacen has made an electronic tool, the Citizen’s Calculator, available for public use. This tool simplifies the computation of default interest rates in accordance with the new legal standards.
However, debates surrounding the default interest rates persists. On April 17, 2024, a draft bill to amend the Civil Code was presented in the Senate Plenary, proposing to set a default interest rate between 1% and 2% per month. While its chances of approval appear remote, its passage could reshape the current framework and reignite legislative discussions.
For now, in the absence of an express agreement between the parties, the Selic rate minus the IPCA applies as the default rate, calculated in accordance with Bacen’s prescribed formula and monthly disclosed percentages. Legal practitioners should, however, remain vigilant for future regulatory updates and developments regarding the proposed draft bill, as they may significantly alter the determination of default interest rates.
Authors: Talita Orsini de Castro Garcia, partner Ana Letícia Fagundes, lawyer Chiara Prupere Giovaneti, lawyer