In this Tax Law newsletter, you will find:
- Rio de Janeiro State’s Court dismisses levy of ICMS diferential rate on tax substitution
- STJ prohibits offsetting ICMS-ST with regular ICMS
- STF sustain its understanding on ICMS on transfer of goods between branches STF
- STF on afrmm rate increase STF
- Taxpayers and Nacional Treasury challenge the modulation of effects in the STJ Theme 1079
1 Rio de Janeiro State’s Court dismisses levy of ICMS diferential rate on tax substitution
A tire company obtained a favorable ruling from the Rio de Janeiro Court of Justice (TJRJ), exempting it from paying the ICMS tax rate differential (DIFAL) under the tax substitution regime. ICMS (Tax on the Circulation of Goods and Services) is a state-level value-added tax, and DIFAL is an additional charge applied in interstate transactions, in which the difference of the tax due to each state needs to be collected by the taxpayer. Under the tax substitution system, the tax is prepaid by the manufacturer or importer on behalf of the entire supply chain.
The 6th Chamber of theCourt ruled that the company was not required to pay DIFAL in this context because the charge was not established by a complementary law.
In 2021, in the judgment of Theme 1093 of general repercussion, the Federal Supreme Court determined that the regulation of DIFAL should be enacted through complementary law. To meet this requirement, Complementary Law No. 190 was punlished in 2022, to regulate the ICMS DIFAL. However, this legislation did not address the tax substitution regime.
The TJRJ’s decision is groundbreaking, since courts often understand that LC 87 and, more recently, LC 190, apply automatically to the ICMS-ST. The Rio de Janeiro court, however, considered that the complementary law should also address this other type of regime, in order to the tax to be valid.
2 STJ prohibits offsetting ICMS-ST with regular ICMS
The 1st Panel of the Superior Court of Justice unanimously upheld a decision by the São Paulo Court of Justice (TJSP) denying the offsetting of ICMS-Substitution (ST) debts against regular ICMS credits.
The TJSP had denied the company’s request on the grounds that there was no legal provision for this type of offsetting. The taxpayer’s claim was that, since these are establishments of the same legal entity, it would be possible to centralize the calculation of ICMS and, consequently, offset the credit balance against the ICMS-ST due.
However, the reporting Minister pointed out that various state laws prohibit this offsetting and that Complementary Law 87/1996 does not expressly authorize the use of ICMS credits to pay ICMS-ST.
3 STF sustain its understanding on ICMS on transfer of goods between branches STF
The Federal Supreme Court decided, in a general repercussion ruling (Topic 1367), that all instances of the Judiciary must apply the modulation established in ADC 49, which determined that ICMS is not levied on the transfer of goods between companies in the same group.
In the ADC 49, although the Court recognized that the transfer of goods between branches of the same legal entity, it modulated the effects of such a ruling from 2024 onwards, with the exception of companies that already had administrative or judicial proceedings pending until April 29, 2021 (when the decision on the merits of ADC 49 was handed down).
In the original case, the São Paulo Court of Justice had decided not to apply the STF’s modulation. As a result, the TJSP ruled in favor of a taxpayer who had not filed a lawsuit by the date established by the STF in the modulation.
The General Repercussion decision on Theme 1367 was unanimous, under the report of Luís Roberto Barroso to reinforce that the modulation is mandatory to all levels of the Judiciary.
4 STF on afrmm rate increase STF
The Federal Supreme Court decided, in a general repercussion (Topic 1368), that the application of the full rates of the Additional Freight for the Renewal of the Merchant Marine (AFRMM), as from the repeal of Decree 11.321/2022 (which had granted a 50% discount on the rate of this tax) by Decree 11.374/2023, does not need to observe the annual and ninety-days anteriority rule.
With this, the thesis was established:
“The application of the full rates of the AFRMM, as from the repeal of Decree 11.321/2022 by Decree 11.374/2023, is not subject to tax anteriority (annual and ninety-days)”.
The General Repercussion decision on Theme 1368 was unanimous, under the report of Luís Roberto Barroso.
5 Taxpayers and Nacional Treasury challenge the modulation of effects in the STJ Theme 1079
The modulation of the effects of the Superior Court of Justice’s ruling on Theme 1079 is still being discussed between taxpayers and the National Treasury (PGFN). The PGFN appealed to the STJ’s Special Court, questioning the decision that eliminated the 20 minimum wages limitation for the calculation basis of these contributions, while the taxpayers appealed to the Federal Supreme Court (STF).
The modulation of effects determined that only taxpayers who filed lawsuits or submitted administrative requests before the judgment of the repetitive appeals, and have obtained a favorable decision until the publication of the judgment, which occurred on May 2, 2024, could apply the ruling for past periods.
The PGFN argues that modulation is not justified due to the lack of a dominant jurisprudence, since most of the decisions favorable to taxpayers that existed before the judgment were monocratic. In addition, the PGFN argues that the STJ has innovated by considering as dominant case law collegiate decisions of only one panel, complemented by isolated monocratic decisions.
Taxpayers, on their turn, question the restriction of modulation to only those who had a favorable court decision, arguing that it violates constitutional principles such as isonomy and legal certainty, requesting that all taxpayers who filed lawsuits should be covered by modulation.
In addition to procedural issues, modulation left several gaps, especially in relation to the application of the understanding to other parafiscal entities that were not specifically mentioned in the decision. Modulation also raised doubts about its application to taxpayers whose favorable injunctions were later revoked, and about the possibility of recovering amounts prior to the filing of the lawsuits.
