30/08/2021

In 2009, the state of São Paulo published Decree 54,177/2009, which established a tax substitution regime for the collection of ICMS on electricity within the scope of the free energy market, attributing new wording to §§ 2º and 3º of art. 425 of the ICMS Regulation, determining that energy distributors also collect ICMS on the value of energy directly contracted by consumers with traders.

As a result of the tax substitution created, ABRACEEL (Brazilian Association of Electric Energy Trading Agents) filed a lawsuit alleging unconstitutionality with regard to the tax substitution, since there was a violation of the principles of general and tax legality, as such a measure should not have been instituted by Decree.

The decree, according to ABRACEEL, also violates the principles of free competition and free enterprise, as consumers would need to inform the distributor of the value of the energy contracted with the traders, as well as violating the federative balance, as it is up to the Union to legislate on energy, according to articles 1 and 22, IV, of the Federal Constitution.

Regarding tax substitution, the most relevant point of the lawsuit filed, it is known that energy acquired in the free environment is contracted exclusively by concessionaires, permit holders and authorized generation agents, traders, importers and exporters of energy and free consumers. The Decree, however, attributes tax liability to third parties not participating in the Free Contracting Environment - ACL, that is, energy distributors, in this trading environment, have the exclusive function of distributing the energy transacted between free agents.

When judging the direct action of unconstitutionality, the Rapporteur, Minister Ellen Gracie, recognized the merits of the action, considering that the tax substitution must be made only and exclusively by means of law in the strict sense, according to arts. 5, inc. II and 150, inc. I of the CF.

Regarding the provision of information on the amount due, charged or paid for electricity to the Treasury Department, the understanding set out in the ruling is that knowledge of the price charged by the distribution agent, which does not act in the purchase and sale relations of electricity in the ACL, by its competitors, is contrary to the principles of free enterprise and free competition provided for in art. 170 of the Constitution of the Republic.

The rapporteur's decision also describes that it is the Union's responsibility to legislate on electrical energy, thus contradicting art. 22, inc. IV of the Constitution of the Republic.

Despite the State of São Paulo's claim that the collection of ICMS by the energy trader or generator gives rise to tax evasion due to the large number of energy traders and generators, it is true that all contracts, both in the regulated market and in the free market, are registered with the Energy Trading Chamber - CCEE, and, therefore, fiscal control of state or interstate operations can be obtained through the CCEE, allowing due control by the State.

It is important to note that, currently, the votes that accompanied the rapporteur of the case are not fully available, the judgment has not even been published, much less the full publication of the winning and dissenting votes.

In view of this, much speculation has been generated in the market. It is important to highlight that the judgment, in our opinion, correctly prevented the well-known parallel substitution, that is, a third party in the legal relationship being obliged to be responsible for the obligation to pay the tax.

However, the market has become eager to make categorical statements, from the fact that energy prices will increase to denialist statements that the decision to declare the article of the Bandeirante decree unconstitutional has no effect.

At this point, what we can say is that the cost of complying with tax obligations will increase for companies that did not observe the incidence of ICMS on electricity purchase and sale transactions.

Also, in our understanding, there will be a greater demand for the energy derivatives market, at least in theory, given the fact that in financial transactions there is no incidence of the tax hypothesis, the cost of tax compliance disappears in relation to SEFAZ/SP, since in these transactions there is no circulation of the merchandise (energy), encouraging in any case the option of agents who act as speculators in the commercialization market to move towards suitable instruments.