Brazilian Supreme Court hears a case that could have a billion-dollar impact on companies in the country

After Carnival, the Federal Supreme Court (STF) is expected to judge a case that could generate a billion-dollar impact on companies’ cash flow.

The case concerns the VAT on state-leve sales and services (ICMS) collection on transferring products from the same company between states.

Retail is one of the sectors that can be most impacted since it is organized between distribution centers that send products to stores throughout Brazil.

In the judgment, the justices will decide whether or not the corresponding tariffs of the cost of transmission (TUST) and distribution (TUSD) of electricity make up the basis of the calculation.

The case involves Complementary Law (LC) No. 194 of June 2022, which excludes these amounts.

The ministers are discussing, in the virtual plenary, the constitutionality of the rule.

The story gained another chapter last week with an injunction by Justice Luiz Fux.

He granted the states’ request and suspended the section of LC No. 194, which excluded the TUST and TUSD from ICMS collection.

“The estimate is that every six months, the states stop collecting approximately R$16 billion,” justified the magistrate.

Since then, the states have again demanded the amounts from taxpayers.

Transmission and distribution tariffs comprise the total value of residential, commercial, and industrial electricity bills.

If the ministers decide to exclude the tariffs from the ICMS calculation basis, less tax is paid to the states.

Otherwise, you pay more.

With information from Revista Oeste