Until the end of 2021, the collection of interstate ICMS was governed by an agreement signed by the National Finance Policy Council (Confaz). This body brings together the secretaries of finance of all the state governments and the federal district.
However, the Federal Supreme Court (STF) ruled that this agreement was unconstitutional in a judgment handed down in August 2020. At the time, the court ruled that it was necessary to issue a complementary law to regulate the collection of interstate ICMS.
The decision led to the approval of Complementary Law 190/2022, which organizes the collection of ICMS on sales and services to final consumers located in a state other than that of the supplier.
The new legislation, as expected, will have a direct impact on the operations of millions of companies in the service, industry and commerce sectors. And to understand the main changes, it's worth checking out this article. Here, we'll cover the main topics related to the collection of interstate ICMS.
ARTICLE: What is ICMS and how does it work? - 2022
How are interstate ICMS rates determined?
A rate of 7% is applied to products leaving the South and Southeast (except Espírito Santo) to states in other regions. When we have the opposite flow, i.e. the product leaves the North, Northeast or Midwest towards the South and Southeast, a rate of 12% applies. The same percentage is used for transactions between states in the latter two regions.
Until the enactment of Complementary Law 190/2022, interstate ICMS applied exclusively to transactions between companies. Therefore, under the current rules, the internal tax rate of the destination state (17% to 19%, in most general cases) and the interstate tax rate (7% or 12%) remain with the tax authorities where the buyer is located.
The rules in question exist to foster regional development. As we know, the South and Southeast are responsible for concentrating a large part of the country's industry, as well as having a more dynamic economy in other sectors.
When do the new rules come into force?
The new rules come into force 90 days after the publication of the new ICMS Law, which happened on January 6th. However, the Federal Supreme Court (STF) ruled that the agreement signed by Confaz is not valid as of January 1.
As a result, until the first half of April there will be a period of vacancy in the legislation. In other words, ICMS will not be levied on interstate transactions.
To which entity is the interstate ICMS due?
The difference in ICMS rates between states is called Difal. Therefore, by regulating who must pay this cost, the new legislation divides taxpayers into two groups: those who are subject to paying the tax (companies) and those who are not (individuals).
According to Law 190/2022, it is the supplier of the product or service who must pay Difal when the end consumer is an individual. In the case of legal entities, the contracting company must pay the difference.
To make things clearer, let's look at an example. A company from São Paulo sells a microwave oven to a company from Sergipe. The tax rate in Sergipe is 18%, while the interstate tax is 7%.
In this case, the São Paulo company will pay its state's tax authorities the rate of 11%, while the Sergipe government will receive the Difal of 7% from the company based in its state.
In order to make the new rules easier to understand, the Federal Senate then published an explanatory leaflet on its website, which gives an example of how interstate ICMS is charged:
How to issue the interstate ICMS invoice?
Complementary Law 90/2020 also requires the states of the federation to make a series of information available on their respective websites to facilitate the collection of interstate ICMS. Basically, the portals should include
- information on the legislation applicable to the specific operation;
- solutions to binding decisions in administrative proceedings;
- information on tax benefits that may influence the tax payable
- table of rates and
- accessory obligations.
What are the main differences with the current rules?
One of the major motivations for changes to the ICMS rules has to do with the how the tax was collected. Until 2015, before Difal was introduced, the state of origin of the product or service collected the tax in full.
However, with the growth of e-commerce, the rules in force began to produce significant distortions in terms of the distribution of the tax. We used to have situations, for example, where the goods produced did not come from the state of origin, but were only distributed.
With the establishment of Difal and now, with the approval of Law 190/2022, it is hoped that there will be greater tax equality between the states of the federation.
In conclusion, we hope that today's article has given you a good overview of how interstate ICMS works. And if you have any questions, please leave them in the comments.
