Rio de Janeiro's Finance State Secretary enacts Resolution SEFAZ # 1,000/2016 determining the dismissal of tax assessments and written notices claiming the payment of State VAT (ICMS) on temporary importation of assets, provided that no transfer of title occurs.
On 27 April 2016, the Rio de Janeiro State Revenue, based on a decision issued by the Brazilian Supreme Court full bench (RE # 540.829- SP), enacted Resolution SEFAZ RJ #. 1,000 / 2016, determining the dismissal of any tax assessments and/or written notices issued by the State of Rio de Janeiro tax authorities claiming the payment of the State VAT (Imposto sobre Circulação de Mercadorias e Serviços - ICMS) on the temporary importation of assets, provided that there is no transfer of title of the assets from the foreign exporter to the Brazilian importer. It also prevented the issuance of new tax assessments and written notices on the same subject, clarifying that the ICMS shall only be paid by the time that the assets are definitively imported and/or the temporary importation regime terminates.
Indeed, the Brazilian Supreme Court ruled the VAT (ICMS) imposition over temporary imports of assets under lease agreements unconstitutional. The rationale behind the Brazilian Supreme Court understanding was that the Brazilian Constitution authorizes the States and Federal District to charge the VAT (ICMS) over transactions involving the legal circulation of goods and/or assets, which does not occur whenever assets are imported on a temporary basis, under lease agreements, as their title remains with the foreign exporter .
Before the enactment of Resolution SEFAZ # 1,000/2016, the Rio de Janeiro State General Tax Attorney had already issued Notice PGE/PG2/#862/2015, authorizing Public Tax Attorneys not to appeal from decisions challenging the ICMS imposition. Nevertheless, as state tax authorities are not bound by Notice PGE/PG2/#862/2015, the enactment of Resolution SEFAZ # 1,000/2016 was an important measure to prevent new tax assessments.
Finally, note that, even though we generally welcome Resolution SEFAZ RJ # 1,000/2016, it states that requests for ICMS refund will be rejected at the Rio de Janeiro State administrative level. We understand that such up front rejection is null and void and that taxpayers, who paid ICMS on temporary imports during the last five years, shall be entitled to claim the ICMS refund at the Brazilian Courts.