Supplementary Law was enacted, limiting ICMS taxes on essential items, providing for the non-levy of ICMS tax on TUST and TUSD and establishing presumed credits for acquisition of fuel with zero PIS and COFINS rates

On June 23, 2022, Supplementary Law No. 194, resulting from Supplementary Bill (“PLP”) No. 18/2022, was enacted, through which amendments to Supplementary Law No. 87/96 and the National Tax Code, among others, were inserted.

The main change, which resulted in the Bill, consists in the express definition of the essential nature of fuels, natural gas, electric power and communications and public transportation services. Due to such change, the application of the Tax on Circulation of Goods and Services (“ICMS”) rates higher than the standard rates of each State for such goods and services was prohibited. In the state of São Paulo, for example, these operations and statements cannot be subject to rates higher than 18%. The increase of rates currently in force was also prohibited, specifically for fuels, natural gas and electric power. On the other hand, the application of smaller rates is optional.

In addition, the Law establishes that there will be levy of ICMS tax on “transmission and distribution services and sectorial charges associated with operations with electric power”, among which Tariff on the Usage of Transition Systems (“TUST”) and Tariff on the Usage of Distribution Systems (“TUSD”). On this note, it is important to highlight that the issue was affected by the Federal Superior Court (“STJ”), through Repetitive Subject 986, awaiting judgment since December 15, 2017. Although the issue of non-levy of ICMS on such tariffs has been resolved, the new Law does not clarify whether the created provision has an interpretive nature, and therefore, if its effects should be retroactive to generating facts occurred prior to its publication. Likewise, no explanation concerning claims previously filed on the matter was given.

Amendments to Supplementary Law No. 192, which provides for the one-stage levy of ICMS were made. For example, it was determined that, until December 31, 2022, the calculation base of ICMS for diesel fuel will be the moving average of prices practiced to the final consumer within sixty (60) months prior to its fixation. Presumed Social Integration Program Contribution (“PIS”) and Social Security Financing Contribution (“COFINS”) credits were established due to acquisitions in the domestic market and imports of diesel, biodiesel, LPG and aircraft kerosene, while the zero rates of these taxes last. Meanwhile, the reduction of such rates to zero will be in force until December 31,2022.

Demarest’s Tax team is available to provide further clarifications on the topic and other related matters.