ICMS-VAT: Changes to approval of benefits by CONFAZ and validation of state incentives
CL 160 – Law Published
The Brazilian government enacted a law Complementary Law (CL) n. 160 that aims to put an end to the “tax wars”? as a result of unilateral ICMS benefits granted by the States.
The CL provides that an agreement will be introduced to formalize the acceptance of certain ICMS benefits among all States where the benefits granted had not received the requisite approval and, therefore, were deemed not to be in accordance with the principles of the Brazilian Constitution.
The published rule allows the maintenance of the benefits and determines that the States decide in Confaz about such a remission of the tax credits established by state legislation. The deadline for this resolution is February, 2018.
In addition, the creation of new incentives is now possible even without the unanimity of Confaz members, with the support of two-thirds of the states and a third of the members of each region.
Due to the possibility of remission of the credits, the companies that used state tax incentives should evaluate their real situation in order to decide on possible adhesion to administrative installment programs, which are being promoted by many of the state governments.
It is important to remember that although it does not grant the right to compensation or any form of credit utilization, LC 160 has retroactive effect to its provisions. In this way, the eventual validation of incentives will exterminate administrative and judicial discussions on the issue.