Statute reduces ICMS-tax cap on fuels, electricity, natural gas, telecommunications, and public transport 

On June 23, Supplementary Law No. 194/2022 was published in an extra edition of the Official Gazette. The statute amended the National Tax Code and the Kandir Law so as to include under essential goods and services those pertaining to fuels, electricity, natural gas, communications, and public transport.  As a result, the rates of the Sales and Services Tax (ICMS) levied upon these sectors’ transactions cannot exceed the standard rates established by each State for general transactions, which are usually set at 17% or 18%. Up until recently, these were considered non-essential sectors and their corresponding tax rates could reach up to 30%.

States may also apply reduced ICMS rates to these essential goods as a way to benefit consumers. In the case of fuels, this will serve as the upper limit for specific tax rates. 

Among other provisions, the statute also amended the substitution arrangement for tax payment of diesel-related transactions. For this purpose, until December 31, 2022, the tax calculation basis will be the moving average of the prices charged to the final consumer over the 60 months prior to the calculation. 

The law is aimed at curbing rising fuel and energy prices, and imports are also subject to its provisions. 

Tax rate reduction has been announced by São Paulo  

São Paulo was the first state to adapt to the Supplementary Law. On June 27, by means of SFP bulletin s/nº/2022 , the State Government announced the immediate reduction of the ICMS tax levied on intrastate transactions related to the targeted services. 

Thus, the following will be taxed at an ICMS rate of 18%: 

• anhydrous ethyl alcohol (ethanol) fuel transactions; 
• gasoline transactions;  
• kerosene-type jet fuel transactions, except when destined to regular passenger and freight air transport companies; 
• electricity-related transactions, in relation to residential bills whose monthly consumption is over 200 (two hundred) kWh   rendering of communication services. 

It is recommended for taxpayers to await the pronouncements of other federative units incorporating the Law’s provisions into their respective legal systems.