In a session held on Tuesday, May 28, 2024, the Executive Branch removed the obligation to transfer ICMS book credits on transfers of goods between establishments of the same taxpayer located in different states, which benefits taxpayers who receive ICMS tax incentives calculated on the tax levied on the movement of goods.

In order to comply with the STF ruling that recognized the unconstitutionality of ICMS on transfers of goods between establishments of the same taxpayer, the government published Complementary Law 204/2023, amending the Kandir Law. Initially, article 12, paragraph 4 of LC 204/2023 provided that if the taxable event for the state tax did not occur, credits relating to previous transactions should be maintained. Paragraph 5 of the same article, in turn, allowed taxpayers, at their choice, to transfer their ICMS credits along with the goods.

However, §5 had been vetoed by the President of the Republic, on the grounds that “Despite the legislator’s good intentions, the legislative proposal runs counter to the public interest by bringing legal uncertainty, making tax inspection more difficult and increasing the likelihood of tax avoidance or even evasion.”

This caused a lot of concern for taxpayers who have state tax incentives, since with the presidential veto they would not be able to use their credits in subsequent transactions. Especially since the decision handed down by the STF, when it ruled on the issue, ruled out the incidence of taxation in these transactions, but made it clear that the transfer of credits would be at the taxpayer’s option.

Thus, with the overturning of the veto, the provisions of §5 of art. 12 of the Kandir Law (included by LC 204/2023) come back into force to define that “AT THE CONTRIBUTOR’S OPTION, the transfer of goods to an establishment belonging to the same owner may be treated as a transaction subject to the occurrence of the taxable event“, and so, at the taxpayer’s option, the credits can also be transferred.

In short, the taxpayer can consider a non-taxed operation or a normal operation, with the transfer of credits, an option that requires study and tax planning by companies.

The issue has generated a number of repercussions from a tax and commercial point of view, and the Tax Law Department at Marins Bertoldi Advogados is available to answer any questions you may have in the context of each business reality.

By Daiana Oliveira and Ariana de Paula Andrade Amorim