close
Share with your friends

Brazil: Full ICMS credit for sugar, ethanol mills (São Paulo)

Brazil: ICMS credit sugar, ethanol mills (São Paulo)

A tribunal in São Paulo recognized a taxpayer’s right to a full tax credit with regard to ICMS / ST imposed on fuel acquisitions relating to the production process of sugar and ethanol plants.

1000

Related content

ICMS—Imposto sobre Circulação de Mercadorias e Serviços—is a state-level sales tax imposed on the physical movement of merchandise. ICMS / ST refers to the ICMS collected by refineries with regard to fuels during the initial phase of the production chain.

The tribunal (Tribunal de Justiça de São Paulo) found that a provision of the ICMS regulations of the State of São Paulo was unconstitutional. The plant (taxpayer) in this case was subject to the payment of ICMS on the output of its products (sugar and ethanol) and for its production purposes, the plant acquired large quantities of diesel oil that was used in its machinery. The regulatory provision at issue only allowed a partial credit for ICMS with regard to amounts paid to a diesel oil refinery by the taxpayer.

The tribunal found that the rules in the São Paulo regulations violated a constitutional principle of “non-cumulativeness”—one that would in turn allow ICMS taxpayers the right to offset the ICMS with respect to their operations with the amount charged in previous operations (that is, in the supply chain). Here, the taxpayer (plant) used diesel oil in its production process and ended up bearing all the cost—including the tax burden.


KPMG observation

The tribunal’s decision may provide ICMS refund opportunities for other similarly situated taxpayers.


Read a July 2019 report (Portuguese) prepared by the KPMG member firm in Brazil

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal