In September 2014, the Brazilian Supreme Court ruled that no ICMS should be levied on the temporary importation of leased assets (RE # 540.829). The Supreme Court rationale was that before ICMS can be imposed, there needs to be a legal circulation of the asset and, thus, the title to the asset should have been transferred from the foreign exporter to the Brazilian importer. In general, this transfer of title does not occur when the asset is imported on a temporary basis under the Brazilian special customs regimes, such as temporary admission and the REPETRO.
As a result of this decision, the Rio de Janeiro General-Public Tax Attorney issued Notice PGE/PG2/#862/2015, expressly authorizing Rio de Janeiro Public Tax Attorneys to waive the right to challenge any lawsuits and/or decisions discussing the imposition of ICMS on the temporary importation of assets, provided that no transfer of title occurs.
In May 2015, this matter was further discussed and ruled by the Supreme Court full bench upon the State Tax Authorities' request to harmonize the effects of decision granted on RE # 540.829. The Tax Authorities' request clearly aimed to prevent Rio de Janeiro taxpayers from claiming refunds of ICMS paid on imports carried out under REPETRO and/or temporary admission regime in the last five years. However, commensurate with the other precedents on harmonization effects, the Supreme Court denied such pleading.
As Rio de Janeiro State Tax Authorities are not bound by the General State Attorney Notice, absent a change in law, Brazilian importers are expected to continue challenging the imposition of ICMS on temporary imports at the Brazilian Courts.