The ministers of the Federal Supreme Court (STF) defined that the decision that removed the ICMS in interstate transactions involving companies with the same owner should take effect from 2024. In addition, taxpayers will have the right to maintain and transfer ICMS credits to other states from next year, and it will be up to the states to regulate the matter.
The understanding is the result of the judgment of declaratory appeals in ADC 49, the result of which was proclaimed on the afternoon of this Wednesday (19/4).
This decision is especially important for retail companies, which routinely send goods to branches in other states and were required to pay ICMS on these transactions. To give you an idea, if the transfer of credits were not authorized with the removal of the tax, the ten largest Brazilian retail companies would have estimated a loss of R$5.6 billion in ICMS tax credits per year.
As JOTA PRO Tributos anticipated to subscribers last Thursday (13/4) as a trend for the outcome of the trial of ADC 49, the thesis of Minister Edson Fachin prevailed, with six votes. The judge ruled that the states, within the scope of the National Council of Tax Policy (Confaz), have until next year to regulate the transfer of ICMS credits between establishments with the same owner. If the deadline is exhausted without regulation, the taxpayers' right to transfer the credits is recognized.
In practice, with the modulation of effects approved by the STF, states will continue to charge ICMS on interstate transactions until the end of 2023. The exception is only for administrative and judicial proceedings pending completion by the date of publication of the minutes of the judgment of the decision on the merits of the ADC, that is, April 29, 2021. In this case, taxpayers with a favorable administrative or judicial decision, in addition to not paying ICMS on these transactions, will be entitled to a refund of amounts charged in the past, respecting the five-year prescriptive period for collecting the tax credit.
Furthermore, the current ICMS crediting system will be maintained until the end of 2023. Due to the non-cumulative regime, when purchasing goods and paying ICMS on this transaction, the company appropriates a credit corresponding to the amount of tax paid. At a later stage, when transferring goods to a branch in another state, the company could use this credit to pay the ICMS levied on this transaction and, due to this new taxation, it would earn a new credit. Finally, when the branch sold the product in the other state, for example to the end consumer, it would use this second credit to pay the ICMS levied on this sale.
Attorney Betina Treiger Grupenmacher, a full professor at UFPR, explains that, although, in theory, taxpayers with administrative and judicial proceedings pending completion by April 29, 2021 can request the refund of amounts paid unduly, it is necessary to analyze each case on a case-by-case basis. This is because, when paying ICMS in interstate transactions, these companies used credits to pay the tax. Therefore, in theory, they would also have to reverse the credits.
“Those who filed a lawsuit are exempt from the modulation, but it cannot be said that the refund is guaranteed, because at the same time that the taxpayer debited the ICMS in the transfers, the credit amount was also offset. In this case, if the taxpayer seeks a refund, the credit would have to be reversed. It doesn’t make much sense. The judge of the lawsuit will probably analyze this issue,” says the lawyer.
ADC 49 and the quorum for effects modulation
The result was announced on Wednesday afternoon (19/4) after a year and a half of processing of the declaration of embargoes filed by the state of Rio Grande do Norte. The federative unit requested that the decision that removed the ICMS from interstate transactions produce effects going forward, in order to protect transactions carried out and not contested in court until the publication of the minutes of the judgment on the merits.
However, given the impasse due to the lack of a quorum necessary for the modulation of effects, the trial was suspended four times in the virtual plenary session due to requests for review. Last week, after the presentation of the votes of all ministers, it was interrupted for the fifth time for the proclamation of the result in the physical plenary session, which occurred this Thursday.
Eight votes are required to modulate the effects of a decision declaring a provision unconstitutional. However, in the virtual trial concluded on April 12, the judges formed a score of 6X5. In addition to the six votes to approve Fachin's thesis, five were presented to validate Dias Toffoli's position. The difference is that Toffoli proposed that the decision would be effective 18 months from the date of publication of the minutes of the judgment of the declaratory appeals and that the transfer of ICMS credits would be regulated by means of a supplementary law, and not by an agreement between the states.
When proposing the result for the proclamation of ADC 49, the president of the STF, Minister Rosa Weber, stated that all the ministers agreed that the decision should be modulated. They only disagreed on the terms of the modulation and, in this aspect, there was a majority for Fachin's proposal.
“Everyone modulates. The need for the eight is for us to modulate and, here, everyone modulates. From my point of view, the modulation that has the majority would prevail, and there are six voting in a line”, stated Weber.
“Strictly speaking, the proposal I formulated is contained in the more comprehensive proposal. Therefore, anyone who votes for the more comprehensive proposal does not fail to agree with the proposal I made. There is unanimity for [the decision to be effective from] the next financial year,” said Fachin.
Minister Nunes Marques emphasized that the plenary session reached the quorum for modulation and that “a simple majority is responsible for resolving the issue.” “The quorum is for modulation. We reached the entirety, and a majority of six makes the result a winner,” he said.
For tax specialist Eduardo Pugliese Pinceli, partner at Schneider Pugliese, the STF’s decision in ADC 49 is prudent. “The Supreme Court upheld the Constitution. The modulation is in line with what the STF has been working on today, with the issue of protecting the public treasury. Furthermore, the possibility for the taxpayer to maintain and transfer the credit was important, because, in addition to respecting the taxable event, the decision respects the principle of non-cumulativeness,” he stated.