On December 12, 2019, Law No. 8,645/2019 was published by the State of Rio de Janeiro creating the Temporary Budgetary Fund, pursuant to ICMS Agreement No. 42/2016 and Federal Law No. 4,320/1964.

This new law revokes Law No. 7,428/2016, which created the State Fund of Fiscal Balance (FEEF), which had similar rules to the Temporary Budgetary Fund. The FEEF was declared unconstitutional by a special panel of the Rio de Janeiro State Court but remains valid until December 31, 2020.

The Temporary Budgetary Fund is a new version of FEEF and whose main aspects are the following:

  • The new law states that the use of tax benefits or incentives already granted or that may be granted are subject to a deposit in the amount equivalent to 10% of the difference between the value of the tax calculated with and without the use of the benefit or the tax incentive granted to ICMS taxpayers.
  • If the taxpayer fails to make the deposit for three months—consecutive or not— the benefit/incentive will be terminated.

It is worth noting that certain taxpayers that were not subject to payment to the FEEF will be subject to payment to the Temporary Budgetary Fund; this includes the taxpayers that benefited from the Special Tax Treatment of Law No. 6,979/2015 and taxpayers subject to Decree No. 36,453/2004 (Riolog).

The new law will be effective as of January 01, 2020 and in force during the Fiscal Recovery Regime (RRF). For all legal entities benefiting from the Special Tax Treatment provided by Law 6,979/2015, as per item XIV, article 14 of Law No. 7,428/2016, the new law will be effective as of 90 days from the date of its publication.