ICMS Tax Credits: STF Ruling May Create Opportunities for Industrial Companies

Theme 1,465 will define the scope of the right to ICMS tax credits on intermediate goods used in the production process.

What will the Supreme Federal Court decide?

The Brazilian Supreme Federal Court (STF) will determine the scope of the right to ICMS tax credits on intermediate goods used in the production process, even when such items do not physically become part of the final product.

If the Court rules in favor of taxpayers, the decision may allow:

• the recognition of ICMS tax credits on future transactions; and
• the recovery of tax credits relating to the previous five years, subject to the particular circumstances of each case.

Who may be affected?

The discussion is particularly relevant to the manufacturing industry, including companies operating in the chemical, pharmaceutical, food and beverage, pulp and paper, metallurgy, steel, mining, automotive and other industrial sectors.

Why assess this issue before the judgment?

If the STF recognizes taxpayers’ right to these tax credits, any prospective limitation of the effects of the decision may restrict its benefits to companies that have already filed a lawsuit before the judgment is issued.

For this reason, companies are advised to assess, in advance, the most appropriate strategy to preserve this right.

How BVA can help?

Our team is closely monitoring the case and is prepared to:

• assess whether the legal thesis applies to your company’s operations;
• estimate the potential financial impact; and
• define the most appropriate legal strategy to preserve your company’s rights.