ICMS On Interstate Transactions Leads To Controversy In Brazil

As previously discussed, Constitutional Amendment 87 (CA 87/15) brought significant changes to the collection of state VAT (ICMS) on interstate transactions to end consumers.

According to CA 87/15, in all interstate transactions to end consumers, the ICMS levied should be split between the state of origin and state of destination as follows: (a) to the state of origin, the ICMS calculated at the interstate rate (4%, 7% or 12%); and (b) to the state of destination, the ICMS calculated based on the difference between the interstate rates used in the transaction and the rate applicable to internal transactions in the state of destination (usually from 17% to 19%).

However, these new proceedings required regulation by a supplementary law, as determined by the Brazilian Federal Constitution.