On March 25, 2022, ICMS Convention No. 16/2022 (the “Convention”) was published in the Official Gazette, by which Brazil's National Council of Finance Policy ("CONFAZ") established a single levy of ICMS on diesel oil; defined the applicable tax rates, based on Supplementary Law No. 192/2022; and authorized the states and Federal District to use tax equalization mechanisms.
Since Supplementary Law No. 192/2022 (published on March 11, 2022) established that the rate shall be fixed by a specific unit of measure (ad rem), the Convention, in turn, fixed the "ad rem" rate of diesel oil A S10 at BRL 1,0060 per liter and, for other diesel oils A, at BRL 0,9986 per liter—rates valid for the entire national territory for a minimum period of 12 months from the Convention's publication.
Pursuant to the Convention, the tax burden equalization factor will be in force for a minimum period of 12 months counted from the Convention's publication, and it cannot be higher than the amount of the difference between the "ad rem" rate fixed by the Convention and the effective tax burden in force in each state and the Federal District at the date of the Convention's publication.
In addition, in interstate transactions, the tax equalization factor of the fuel's state of destination will be considered, and, in subsequent interstate transactions, the sender of the product will collect the amount correspondent to the difference of the tax rates when the destination state has a lower tax equalization factor, and the amount will be reimbursed by the supplier when the destination state applies a higher tax equalization factor.
ICMS Convention No. 16/2022 will produce effect from July 1st, 2022 onwards, and it is still pending the ruling by the States and the Federal District.
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