Tiago Silva
Lawyer at Marcos Marcos Advogados
On August 24, 2022, the Federal Government published Decree No. 11.182/2022, raising the IPI rates on 109 products, in order to comply with the STF’s decision to preserve the Manaus Free Trade Zone, but the legal uncertainty still doesn’t seem to be over.
The imbroglio surrounding the IPI exemption began with a 25% linear reduction in the tax rate promoted by the Federal Government at the start of the year. In May, this reduction was increased to 35%, with the exception of only a few products produced in the Manaus Free Trade Zone and only in relation to the additional 10% reduction.
This tax break prompted the Solidarity Party to file a direct action of unconstitutionality before the Supreme Court. The allegations were that the IPI reduction harmed companies that had set up in the Manaus Free Trade Zone.
The Free Trade Zone was created with the aim of developing the northern region of the country and the companies that invest in that industrial center receive various tax benefits. In this context, the allegation made to the STF was that a general IPI exemption would mean that companies from all over the country would receive tax benefits without having invested in the Free Trade Zone.
Justice Alexandre de Moraes, of the Federal Supreme Court, when analyzing the direct action of unconstitutionality, granted a precautionary measure suspending the IPI reduction for all the products of competitors of companies installed in the Free Trade Zone, meaning that companies installed in other parts of the country that sell products manufactured in the Manaus Free Trade Zone could not benefit from the tax reduction.
The STF’s decision, handed down in May of this year, has caused enormous legal uncertainty, as there is no official and exhaustive list of products manufactured in the Manaus Free Trade Zone for which the IPI reduction would not apply.
In order to comply with the decision, the Superintendence of the Manaus Free Trade Zone (Suframa) sent several lists of products manufactured in the Free Trade Zone to the Ministry of Economy. The lists contain thousands of products and since then, the government has been analyzing and filtering these lists to try to comply with the STF’s decision.
Through SEI Technical Note No. 22223/2022/ME, the Ministry of Economy suggested re-establishing the full rates for approximately 60 products, which would account for 95% of the turnover of companies established in the Free Trade Zone.
Based on this technical note, Decree 11.158/2022 was issued, re-establishing the normal rate for 61 products. The government’s intention was to comply with the STF’s decision, however, a new decision was handed down by the Supreme Court, suspending the effects of Decree 11.158/2022, as it was still damaging the Manaus Free Trade Zone.
In August of this year, a new Decree (No. 11.182/2022) was published, also with the aim of complying with the decision, re-establishing the rate for a further 109 products. The government’s argument is that there is now effective protection for the competitiveness of the Manaus Free Trade Zone, as a total of 170 products have had their rates re-established.
The fact is that the STF’s decision to suspend the presidential decrees is still valid and there is no legal certainty as to which products are produced in the Free Trade Zone, in relation to the application of the normal or reduced IPI rate. SUFRAMA’s lists include more than 2,000 products and the rates have only been reinstated for 170 so far.
While there are arguments for taxpayers to consider that only these 170 products are produced in the Free Trade Zone, as the Ministry of Economy itself is considering this to be the case, there is a much longer list from SUFRAMA and as long as the STF decision is not overturned, there is a risk that the use of the reduced rate will be questioned in the future.
Faced with this situation of insecurity, it is up to each taxpayer to assess with a specialized legal consultancy what stance they should adopt regarding the IPI reduction, evaluating all possible scenarios and their respective risks, as the controversy surrounding this issue does not seem to be over.
