According to State Law # 7,428 / 2016 and State Decree # 45,810 / 2016, the enjoyment of any Imposto Sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual de Intermunicipal e de Comunicações (ICMS) tax incentive or benefit in the State of Rio de Janeiro is conditioned to a mandatory 10% deposit over the difference between the ICMS that would be due by the taxpayer, if no incentive or benefit was granted, and the value to be effectively disbursed1.
As reported in a previous Global GST/VAT newsletter, the Federation of Goods Trade, Service and Tourism of Rio de Janeiro State ("FECOMÉRCIO") filed a Collective Lawsuit challenging the constitutionality of the Law # 7,428/2016 and requiring a preliminary injunction to prevent the State of Rio de Janeiro to demand the 10% monthly deposit to the State Fund of Fiscal Balance (FEEF) to all Rio de Janeiro Taxpayers.
The preliminary injunction was initially granted by the Rapporteur judge, but, on 20 February 2017, the full bench of the Special Chamber revoked it on the grounds that the deposit to the FEEF is constitutional and should not be considered as a new tax
However, a final decision on the merits of the case is still pending to be analyzed and may be scheduled soon.
In addition, on 19 December 2016, the National Confederation of Industry (CNI) also filed a Lawsuit (ADI # 5635) to challenge the constitutionality of Law # 7,428 / 16 at the Brazilian Supreme Court.
On 4 May 2017, the Brazilian Supreme Court denied the injunction requested by CNI. The lawsuit is still pending analysis on the merits of the discussion
We understand that although these two lawsuits are not related, it is possible that the Brazilian Supreme Court follows the same rational granted by the full bench of the Special Chamber of the Rio de Janeiro State Court, stating that the FEEF is constitutional. It is important to note that the merits of the case will have a direct impact in all the measures that are being implemented by the Rio de Janeiro State to increase its revenues.