The Government of the State of São Paulo changed this week the rules for collecting ICMS in the free energy market, an environment that allows suppliers and consumers to negotiate electricity freely and establish contracting conditions in a much more flexible way than occurs in the traditional market.

With the publication of Decree No. 65,823/2021, art. 425-B was introduced.[1] in RICMS/SP, granting the supplier, if located in the state of São Paulo, the obligation to collect ICMS in transactions involving energy contracted in a free environment. If the supplier is located in another state of the federation, this responsibility is transferred to the recipient (purchaser).

The legislative change occurred after the Federal Supreme Court declared the provisions previously inserted in RICMS/SP (art. 425, I, b and §§ 2nd and 3rd) to be unconstitutional, which attributed to the electricity distributor the responsibility for collecting ICMS-ST due in transactions with recipients who used the distribution network to purchase energy in the free contracting environment.

The STF's decision in the trial of ADI No. 4,281 was handed down on October 13, 2020, and was mainly based on the lack of legal provision for the attribution of liability as intended by São Paulo legislation.

In turn, the changes made to the São Paulo legislation in accordance with the Supreme Court's understanding come into effect on September 1, 2021. In addition to the aforementioned responsibilities, the wording of art. 425-B, in its § 5, provides for the possibility of issuing a Special Regime to defer payment of the tax due until the moment the electricity enters the recipient establishment in São Paulo.

It is important to mention that, in energy outputs resulting from supply contracts signed in the regulated contracting environment (art. 425, I of RICMS/SP)[2], the responsibility for collecting ICMS remains with the electricity distributors. The distributor is also responsible for collecting ICMS due for connection and usage charges, related to transactions carried out in the free contracting environment, when the end consumer is directly connected to its distribution network (art. 10, VI of Annex XVIII of RICMS/SP).

[1] Art. 425-B. In the event that a consumer from São Paulo, connected to the distribution or transmission network, has acquired electrical energy in the free contracting environment, the responsibility for the assessment and payment of the tax levied on successive internal transactions involving electrical energy is attributed to:

I – to the seller of electrical energy located in the State of São Paulo;

II – to the recipient of the electrical energy, when the seller is located in another State.

[2] Article 425 – Responsibility for the assessment and payment of taxes on successive internal transactions involving electrical energy, from its import or production, is assigned to:

I – the distribution company, responsible for the operation of the distribution network in the State of São Paulo, which carries out an operation related to the circulation of electrical energy, the object of an output promoted by it, sending it directly to an establishment or home located in the territory of São Paulo to be consumed therein by the respective recipient, when the latter, as a consumer, is connected to the distribution or transmission line, part of the network operated by it (…)