Collection of ICMS incident on electricity and telecommunication services, considering the general rate of 17%.
Again we discuss the tax impacts arising from the decisions of the Supreme Court. Now on the unconstitutionality of the increase of ICMS rates on the supply of electricity and telecommunications. To answer the various questions about the reflexes resulting from that decision, it is necessary to understand what the decision of the Supreme was, as well as the modulation for the specific case.
- Theme nº 745 (RE 714139) of the Supreme Court
Decision: Finalized virtual trial on December 17, 2021, there is no judgment passed so far.
Decision on the case merit: The Court, by majority, assessing theme 745 of general repercussion, gave partial assessment of the extraordinary appeal to, reforming the judgment under appeal, deferring order and recognize the right of the plaintiff to the collection of the ICMS incident on electricity and telecommunication services, considering the general rate of 17%, as provided for in State Law No. 10,297/1996, stressing that the requirements regarding tax refund and compensation are in the infra-constitutional scope, according to the rapporteur’s vote, ministers Alexandre de Moraes, Gilmar Mendes and Roberto Barroso outvoted. The following thesis was defined: “The technique of selectivity in relation to the Tax on Circulation of Goods and Services – ICMS adopted by the state legislator is not in accordance with the constitutional ruling on electricity operations and telecommunications services which are higher than operations in general, considering the essentiality of goods and services.”
Decision on the modulation of effects: In continuity of judgment, the Court, by majority, modulated the effects of the decision, stipulating that it produce stake from the financial year 2024, with the reason for the actions filed until the date of the beginning of the judgment of the merits (2/5/21), pursuant to the vote now adjusted of Minister Dias Toffoli, Editor for the judgment, minister Edson Fachin outvoted.
Summary:
The Supreme Court considered the establishment of an increased ICMS rate for energy and telecommunications unconstitutional, in the demand the rule of the State of São Catarina that required an ICMS rate of 25% for these sectors, against a general rate of 17% was questioned.
The thesis set by the Minister states that the Original Constituent Power did not allow higher rates to be set for electricity operations and telecommunications services at a higher level than operations in general, due to the essentiality of such goods and services.
As the merit was assessed in the systematic of the general repercussion, the judge will bind the entire Judiciary and will overturn other state rules that also required an ICMS rate increased in these hypotheses as long as they are being questioned due to the principle of separation of powers, including the applicant who has 22 claims filed in other States of the Federation questioning this increased rate, that is, they will probably succeed in meeting its claim in said demands.
However, since this demand will impact the collection of several States of the Federation, for reasons of exceptional social interest (art. 927, § 2º of the Code of Civil Procedure), the Supreme Court modulated the effects of the decision so that it would only take effect from the financial year 2024, except for the actions filed until the date of the beginning of the judgment of the merits (2/5/21).
Thus, taxpayers who filed lawsuits to question this merit until 2/5/21 are entitled to refund of the amounts paid in the five years prior to the action.
Conclusion:
- Until 12/31/2023, states will continue to charge the ICMS on electricity at the increased rates.
- The electric power distribution companies that filed lawsuits by 02/05/2021, will be free of the increase and will be able to recover the amounts for the period of 5 years from the date of filing of each lawsuit.
- Companies that consume electricity for industrial purposes will be able to keep the credits in their tax books, highlighted in the invoices of suppliers and distributors of electricity.
- The companies acquiring electricity from the distributors that filed the lawsuits challenging the increase of the ICMS rate, and which are not taxpayers of ICMS, such as banks, service providers, commercial establishments that have not taken advantage of the ICMS credit, may request from the distributors the return of the ICMS charged at the price of the supply of electricity, for the period covered by their respective lawsuits.
- If distributors request the purchasers’ permission to recover the ICMS, they must negotiate the return in accordance with letter “d”.
In the face of the above-mentioned conclusions, the tax and accountant’s departments should verify how the company appropriated the electricity and telecommunication credits in its operations, in order to confirm the possibility of recovery of the ICMS paid in the invoices, observing the provisions in items “c”, “d” and “e”, above.
To do so, contact the following attorneys:
Fernando Ciscato (fernando.ciscato@ronaldomartins.adv.br),
Renato Andrade (renato.andrade@ronaldomartins.adv.br) and
Larissa Tomaz (larissa.alves@ronaldomartins.adv.br).
We are here to provide further information on the matter.
