Justice Alexandre de Moraes, of the Federal Supreme Court (STF), has asked to see the case that discusses the constitutionality of Agreement No. 100/1997 of the National Finance Policy Council (Confaz), which provides for a 60% reduction in the ICMS tax base on interstate sales of certain crop protection products.
Another target of the Direct Action of Unconstitutionality (ADI) is Decree 11.158/2022, which sets a zero IPI rate for the pesticides listed.
In 2017, the tax benefit from the reduction in the ICMS rate was around R$6.2 billion, while the zero IPI rate guaranteed savings of R$1.7 billion for the sector, according to calculations presented by the Brazilian Association of Collective Health (ABRASCO).
The legal dispute, which is being processed as Direct Action for Unconstitutionality (ADI) No. 5.553, was filed by PSOL, on the grounds that pesticides, because they are harmful to human health, could not enjoy the tax benefits granted by the CONFAZ resolution and the decree that set the zero IPI rate.
At the moment, the vote has four votes in favor of maintaining the benefits, declaring the provisions constitutional, two votes in favor of declaring them unconstitutional and one vote in favor of declaring the provisions partially unconstitutional, setting a 90-day deadline for the states and the federal government to assess the degree of toxicity of pesticides in order to determine the tax burden levied on them.
Justice Alexandre de Moraes has up to 90 working days to re-include the case on the agenda for judgment, but it is certain that the new request for a rehearing (there have already been 3 since the case went to trial in 2020) prolongs the uncertainty that hangs over the issue, whose decision could result in a significant burden on the agribusiness sector, given that these inputs benefiting from tax incentives are important elements in the development of agricultural activities.
The sector must therefore be aware of the best tax practices in order to remain competitive in the market in which they operate. If you have any questions on the subject, our tax team is at your disposal.
