End of ICMS on same-company transactions could start in 2022, says Fachin

The Minister of the Federal Supreme Court (STF) Edson Fachin voted for the end of the charge of the Tax on Circulation of Goods (ICMS) on the movement of products between establishments of the same owner, in different states, to take effect in 2022.

The change should result in some reduction in the tax burden paid by companies that have operations in more than one region. On the other hand, it worries the states, which have ICMS as their main source of revenue and fear the drop in revenue.

It concerns a decision taken by the STF in April: the Court considered unconstitutional the collection of ICMS that is made when a company transports goods to its other units in different states.

This is what was provided for in the 1996 law that regulated the state tax, known as the Kandir Law. Since then, however, the issue has been a source of conflict between companies and states in the Judiciary, with diffuse understandings.

The definitive conclusion of the STF was that ICMS should only be applied when there is a legal transfer of products, that is, when it is transferred from one owner to another, and not just in the physical transfer, between establishments of the same ownership.

Now, ministers have until September 14 to vote on open appeals (motion for clarification) and define when the measure should go into effect. Fachin is the rapporteur of the action and presented his vote this Friday (3).

same owner

This interstate ICMS charge, according to the tax director at Mazars consultancy, Luis Carlos dos Santos, is usually 7% to 12% of the value of the merchandise, and is paid to the state of origin.

Among the large taxpayers who currently pay the interstate ICMS on the transfer of goods to other parts of the same company are e-commerce companies and others that have distribution centers in different states, in addition to industries with scattered units, which transport, for example, parts from one factory to another.

“The states that should be most affected are those that concentrate the largest companies, such as São Paulo, Rio Grande do Sul or Santa Catarina,” said Santos.

The states are asking for the end of the collection to take effect only in 2023, to have more time to adapt to their revenues.

According to the director of Mazars, some companies may end up losing tax benefits they have today and will have to redo the accounts, but for most of them, the end of collection should be positive.

“Many companies ended up adapting to the law and went to other states where they gained benefits for these transfers [de mercadorias de um estado para o outro]”, said Santos. “But overall, it’s an excellent change for companies.”