ICMS: State of São Paulo publishes measures aimed at fiscal adjustment

State law increases ICMS rates, affects tax benefits and tax substitution regime, generating an increase in the Tax.

By Rita Araújo

On October 16, 2020, the State of São Paulo published Law 17,293, resulting from Law Project (PL) 529/2020, establishing measures aimed at fiscal adjustment and the balance of public accounts.

The law authorizes the executive branch (Article 22) to:

a) renew the benefits force on October 16, 2020, as long as provided for in the budgetary legislation and provided that the rules related to tax management are observed;

b) reduce the tax and financial-tax benefits that already exist (according to the ICMS Agreement 42/2016 criteria);

c) establish the Optional Tax Regime for tax substitution, for retail segments exempting from paying the amount corresponding to the complementation of the tax withheld in advance;

d) in the ICMS tax substitution, it establishes that the tax withheld in advance should be paid by the substituted taxpayer, when (i) the value of the operation or final installment with the goods or service is greater than the withholding calculation basis and (ii) the following increase in the tax burden on the operation or final provision of the goods or services.

Note: The law considers the ICMS tax rate to be lower than 18%. Thus, this equalization may generate an increase in the ICMS tax burden on certain economic areas.

The executive branch, in turn, has already regulated most of the provisions of that Law, with the edition of the following Decrees, introducing changes to the ICMS Regulation - Decree 45,490/2000 - RICMS/SP:

Decree 65252/2020, published on October 16, 2020, amends the ICMS rates, establishes the duration of the exemption benefit for several items; determines the end of the calculation base reduction; and credits granted on December 31, 2020. The act is effective as of November 1, 2020.

The Decree 65,253/2020, published on October 16, 2020, amends the ICMS rates, being:

Article 53-A

In the Sole Paragraph - establishes an increase of two integers and four tenths percent (2.4%), with the internal operations indicated below having a tax burden of nine integers and four tenths percent (9.4%).

I - condoms classified under NCM code 4014.10.0000;

II - pasteurized whole egg, dehydrated pasteurized whole egg, dehydrated or cooled pasteurized egg white and dehydrated or cooled pasteurized yolk;

III - packaging for egg "in natura".

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Article 54

Increase of 1.3% in order to have a tax burden of thirteen integers and three tenths percent (13.3%), except for transportation services.

Note: consult the list of products in this article at the link here.

It includes conditions to Items XX, aviation kerosene intended to companies of scheduled air transport of passengers or cargo. The new rate of 13.3% can only be applied if the operations are intended to companies of scheduled air transport of passengers or cargo that, through its own operations or commercial agreements signed with third parties, meet the conditions and deadlines for its implementation established in an Executive Branch act that specifies, among other requirements, the minimum number of regional flights that must be operated by these companies.

On the other hand, the rate of 13.3% in food supplying can be applied regardless of the consumption place.

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Article 55

Increases the rate of (XXVI) - fuel anhydrous ethanol (etanol anidro combustível - “EAC”), to 25 %, classified under code 2207.10.0100; aviation kerosene classified under code 2710.00.0401, except in the case provided for in item XX of Article 54; and gasoline, classified under codes 2710.00.0301, 2710.00.0302, 2710.00.0303 and 2710.00.0399.

These changes will be effective as of January 15, 2022 and, regarding to the increase to the increase in 1.3% referred to in Article 54, the amendment will be effective for a twenty-four-month period, as of 15 January 2021.

The Decree 65,254/2020, published on October 16, 2020, including exemptions in Annex I, maintain reductions of what is covered in Annex II, both of the RICMS/SP, effective until Dec-31-2022. This act will be in force as of January 1, 2021.

The Decree 65,255/2020, published on October 16, 2020, deals with changes in relation to Annex II base reductions, and Annex III credits granted, RICMS/SP and enters on the date of publication, will enter into force as of January 15, 2021.