The great territorial extension of Brazil and the partition of the competence to collect state taxes generated for many years a Fiscal War between the States

Mainly the incentives are focused on ICMS, there are variations depending on the state. Some states, for example, encourage the construction of industries by granting specific incentives to reduce construction materials’ ICMS to the case of application in the installation or modernization of industrial park.

It is important to know that all state tax incentives must be previously authorized by the National Council of Finance Policy (CONFAZ) by unanimity, a fact that made the incentives granting practically impossible, which led to irregularities in some incentives approved.

After Complementary Law 160 of 2017 the unanimity of the States is no longer necessary for the approval of the incentives. The reinstatement of benefits and the remittance of credits may be deliberated and decided in an agreement approved and ratified with a favorable vote of at least 18 States. Provided that each of the 5 regions of the Country (North, Northeast, Central West, Southeast and South) is represented by at least 1/3 of the member states.

In 2017 CONFAZ established ICMS Agreement 190/2017 as a result of Complementary Law 160/2017 with the purpose of regulating exemptions, incentives and tax benefits related to the Tax on Circulation of Goods and Services (ICMS) not authorized.

On October 3, 2018, through Resolution 08/18, CONFAZ extended the incentive regularization term to July 31, 2019, when the states of Espírito Santo, Goiás, Paraná, Rio de Janeiro and São Paulo shall present a report with the identification of normative acts related to the fiscal benefits, established by state or district legislation published until August 8, 2017, in disagreement with the provisions of item “g” of item XII of paragraph 2 of art. 155 of the Federal Constitution.

The Resolution also extends the deadline for the States of Acre and Rio Grande do Sul to register and file before the Executive Secretariat of CONFAZ the supporting documentation corresponding to the concessive acts of the tax benefits mentioned, including the corresponding normative acts, according to the provision of the fourth clause, sole paragraph, of ICMS Agreement 190/17.

It is important to distinguish the evolution of the National legislation and its flexibilization regarding the fiscal incentives. Although the issue is controversial, CONFAZ adopted a strategy that maintained legal certainty for companies benefiting from incentives.

Bearing in mind the current situation of the economy and the directions of the Federal Government, entrepreneurs and professionals should be updated on the new incentives for each state of the Federation, thus being able to plead new incentives in their states or to carry out tax planning for new operations in States that offer sufficiently attractive benefits.

RGAA will maintain a follow up on the state tax incentives and keep its readers up-to-date on applicable procedure and benefits.

Legal base:

COMPLEMENTARY LAW Nº. 160, OF AUGUST 7, 2017

http://www.planalto.gov.br/ccivil_03/leis/lcp/Lcp160.htm

ICMS Agreement 190/17:

https://www.confaz.fazenda.gov.br/legislacao/convenios/2017/CV190_17

RESOLUTION 08/18, OF OCTOBER 3, 2018:

https://www.confaz.fazenda.gov.br/legislacao/resolucoes/2018/rs008_18