17/12/2020
After more than 20 years in force, ICMS Agreement 100/97 may have its days numbered. With its end scheduled for March 31, 2021, companies in the agricultural sector, which until now benefited from the agreement, are already planning to try to minimize the impacts resulting from the change in tax treatment.
Published by the National Council for Tax Policy (“Confaz”) on November 4, 1997, Agreement 100/97 was created with the purpose of reducing the ICMS tax burden on various agricultural inputs considered essential for the segment.
According to the normative text, the Agreement provides for the exemption of ICMS in internal transactions and reduces the collection of the tax on interstate trade of agricultural inputs (reduction of the ICMS calculation basis by up to 30% for fertilizers and feed, and by up to 60% for agricultural pesticides and seeds).
The last extension was approved on 11/29/2020, extending the validity to 03/31/2021. For the effects of the rule to be extended again, it is necessary for there to be unanimous approval, within the scope of Confaz, of all States and the Federal District, and there is a fear in the sector that such an extension will not occur.
As a result, companies in the segment have already planned to find alternatives to mitigate the possible impacts of the increase in the ICMS tax burden and, consequently, avoid losing competitiveness. One of them is to seek to reduce the tax burden of other taxes, especially of a federal nature.
It is worth mentioning that, since it was established by Confaz, ICMS Agreement 100/97 has contributed to boosting the sector, guaranteeing rural producers access to agricultural inputs at more competitive prices compared to international competitors. According to data from the Brazilian Confederation of Agriculture and Livestock (“CNA”), growth of 9% in the consolidated agricultural GDP is estimated for 2020.
If the termination of the Agreement is confirmed, the tax impacts could be felt from 2021 onwards. In the State of São Paulo, for example, there has already been an increase in the tax burden, a measure that could also be adopted by other States.
Therefore, industry experts warn that the revocation could even make production unfeasible in some regions, in addition to contributing to increased inflation due to the likely passing on of costs.
