Ângelo Ambrizzi
Lawyer at Marcos Martins Advogados
Decree No. 65.823/21 of the State of São Paulo was published to adjust São Paulo’s legal scenario to a STF decision
The electricity sector is vital to the national economy and, at the same time, an input that directly influences the price of the entire production chain. There is the common energy market, in which the final taxpayer buys the energy and also pays for both generation and distribution services, which is a simpler market to operate in, and there is also the environment for purchasing electricity, known as the free market, in which companies buy energy directly from generators or traders.
Decree 65.823/21 of the State of São Paulo was published to adjust the São Paulo legal scenario to a decision by the Federal Supreme Court (STF), which ruled out the possibility of assigning the distributors as responsible for collecting the Goods and Services Tax (ICMS ) . As a result, the state of São Paulo was left with no choice but to shift the responsibility for paying ICMS, which previously belonged to the energy distributor, to the supplier or purchaser.
The energy supplier will be responsible for paying ICMS if it is in São Paulo territory. If not, the purchaser will be responsible for payment. Apparently, what was supposed to be a simple and straightforward change has aroused doubts and questions in the legal community about some other points brought up by the Decree.
For example, is ICMS levied on the sale of so-called “leftover energy”? The wording contained in the Decree is not clear enough to state whether or not ICMS will be charged on sales within the state of São Paulo between distributors when “leftover energy” is sold.
Another question is, if ICMS is levied on the sale of leftover energy, when will the tax be levied? If ICMS is paid on the transaction mentioned, book credits for this tax will be generated. The Decree also does not make it clear whether ICMS will be levied on the sale of energy between trading companies, mainly because, as a rule, states do not tax this operation.
An important point is the failure to comply with the principle of anteriority. It would be correct for the rules to apply from next year. However, the Decree is already in force. Furthermore, the matter should be dealt with by law and not by decree. There is an extremely important point so that companies can feel safe and comply with the commands desired by the State of São Paulo, which is that the matter dealt with in the Decree should be dealt with by Law.
The principle of legality is one of the taxpayer’s main guarantees and, in this specific case, it is being disregarded, causing even more legal uncertainty as to whether the state of São Paulo can demand the changes proposed by the Decree.
There is no doubt that Decree 65.823/21 of the State of São Paulo has brought legal uncertainty to the electricity producer and distributor sector. Corrections need to be made quickly and effectively by the Executive or the Legislature, otherwise companies in the sector will have to go to court to remove the uncertainty and ensure that taxation correctly reflects the facts originating in the ICMS.
