ICMS increase

Federal Law #194/2022 provided that fuel, energy, and services related to telecommunications and public transports are considered essential and, therefore, cannot have a higher tax rate than other general items.

Similarly, the Brazilian Federal Supreme Court (STF) had already published a decision according to which energy and telecommunication services were essential items, that could not be subjected to a higher ICMS rate, regardless of their consumer or acquired amount. However, the STF had exceptionally changed the effective date of that decision to 2024, except for legal proceedings still ongoing at the date of the trial.

Considering the impact of reduced rates on the fiscal balance, in December 2022, Brazilian states began to approve bills to implement a higher regular standard ICMS rate, increasing their revenues and offsetting their losses.

Up to this moment, 12 states have already approved the increase in their internal ICMS rate. Regular ICMS rates now vary between 17% and 22%.

Key takeaway

We suggest that clients assess the impacts of such increase on their operations.