Resolution of the State of Minas Gerais refuses the full granting of ICMS credit for tax benefits not granted by CONFAZ.
Paulo Machado (Lawyer of Tax Law Team)
Through Resolution No. 4,423, the State of Minas Gerais has expanded the list of operations to which the benefit of granting ICMS (tax on distribution of goods and services) credit is prohibited in situations not covered by agreements entered into with other federal States.
The Brazilian Constitution sets forth that the ICMS tax benefits should be granted only by unanimous approval of all states of the Federation, through the execution of agreements reached thereby during meetings of CONFAZ (National Council of Treasury Policy). Thus, as a measure to eliminate concessions granted by other States of tax benefits that were not agreed to through the appropriate conventions, the State of Minas Gerais, through the aforementioned resolution, lists the products acquired within other States’ territory that do not give rise to full credit for the ICMS.
The measure taken by the State of Minas Gerais is questionable, some legal experts considering that a discussion would be appropriate instead of such restrictive measure that creates uncertainty for taxpayers. In any case, the Supreme Court (STF), given the importance of said subject, is studying how to lighten the problem and it is possible it issues a binding precedent in the future.