The Federal Supreme Court (“STF”) is expected to begin, on 11/04/2020, the trial of Direct Action of Unconstitutionality (“ADI”) No. 5469, through which the validity of the requirement for the differential rate (“Difal”) of ICMS in interstate sales to non-taxpaying end consumers is discussed, under the terms established by Constitutional Amendment No. 87/2015.
It is worth remembering that, prior to EC 87/15, interstate sales to end consumers who were not ICMS taxpayers were subject to taxation at the internal rate of the state of origin. With the advent of said EC, the Federal Constitution (“CF”) began to provide that, in such sales modalities, the ICMS should be divided between the states of origin and destination, with the former being responsible for the interstate rate and the latter for the Difal.[1].
By means of the aforementioned ADI, the Brazilian Electronic Commerce Association (“ABComm”) requests the recognition of the unconstitutionality of the Difal requirement without the prior enactment of a Complementary Law that outlines the general rules on the matter, since the regulation of EC 87/15 only via an act of the National Council of Tax Policy (“CONFAZ”) is contrary to articles 146, III[2] and 155, §2º, XII, paragraphs “a”, “d” and “i”[3], of the CF.
It is worth remembering that the National Treasury Attorney General's Office (“PGFN”) itself expressed its opinion on the matter, through Opinion PGFN/CAT 1,226, pointing out that “the constitutional amendment was integrated into the generic discipline of the ICMS and, therefore, into the system that outlines this tax, including the matter that must be conveyed by complementary law, which is precisely the normative species required by the Constitution and whose material field is defined therein”.
Along the same lines of thought, the Supreme Federal Court, when judging RE No. 580,903, established the understanding that “the establishment of the differential in rates depends on a provision in a supplementary law”.
The expectation is that the STF will recognize the unconstitutionality of the matter argued in ADI No. 5469. Given the possible economic risks that the issue poses to the States, the possibility of modulating the effects of the decision cannot be disregarded, should it be favorable to taxpayers, which is why it is recommended that companies subject to Difal take the discussion to the Judiciary in advance.
Our tax team is aware of the possible developments of this judgment and remains available to clarify any questions regarding the matter.
[1] Which, in short, consists of the difference between the internal tax rate of the destination state and the interstate tax rate paid to the state of origin.
[2] Art. 146. The complementary law is responsible for:
I – to resolve conflicts of jurisdiction, in tax matters, between the Union, the States, the Federal District and the Municipalities;
II – regulate constitutional limitations on the power to tax;
III – establish general rules on tax legislation, especially on:.
[3] Art. 155. The States and the Federal District are responsible for establishing taxes on: (…)
II – operations related to the circulation of goods and the provision of interstate and intermunicipal transport and communication services, even if the operations and services begin abroad; (…)
- 2nd The tax provided for in item II will comply with the following: (…)
XII – the complementary law is responsible for:
- a) define its contributors; (…)
- d) establish, for the purposes of charging and defining the responsible establishment, the location of operations relating to the circulation of goods and the provision of services; (…)
- i) set the calculation basis, so that the tax amount is included, also in the case of imports of goods, merchandise or services from abroad.
