Federal Government Changes Taxation Rules On ICMS Benefits With MP 1185

On Wednesday (December 20), the Senate approved the Provisional Rule (MP) 1185, which determines the taxation of government subsidies by Income Taxes (IRPJ/CSLL) and Social Contribution on Revenue (PIS/COFINS), providing, in return, a tax credit.

Now, the MP's text will move on to presidential sanction, coming into force as Law in January 2024. The primary target of this measure is the ICMS tax benefits, which have recently been the subject of various legal discussions that exempted them from taxation by the Federal Government.

Under this new mechanism outlined in the MP, the subsidy amount will be included in the calculation basis of IRPJ (25%), CSLL (9%), PIS (1.65%), and Cofins (7.6%), and will be taxed accordingly.