São Paulo increases ICMS tax benefits to boost the local industry
Carolina Romanini Miguel and Gabriel Caldiron Rezende of Machado Associados discuss how the local government is taking active steps to incentivise agriculture and food production in Brazil.
The state of São Paulo has reduced the state VAT (ICMS) impact on some acquisitions of fixed assets, in a move which aims at increasing local industrial activity.
- On imports of fixed assets, without a national similar, the ICMS levied is not charged upon customs clearance but rather paid in 48 monthly instalments. In practical terms, as the relevant ICMS credits are also booked in 48 monthly instalments, the ICMS levied on such imports is neutralised;
- If the industrial establishment is in pre-operational phase, a special regime may be granted so that the imports of fixed assets are carried out with the suspension of the ICMS, postponing its payment until the moment that the product resulting from the manufacturing is shipped;
- The possibility of booking, fully and at once, the ICMS credit related to the acquisition of fixed assets acquired directly from a manufacturer located in the state of São Paulo; and
- If the acquiring establishment does not have enough ICMS debts to absorb the full and immediate tax credit, a special regime may be granted to authorise the manufacturer of the asset to sell it with suspension of the ICMS, postponing its payment to when the purchaser of the asset ships the product resulting from manufacturing.
With the aim of boosting the local industry, the state of São Paulo issued Decree 64687/2019 on December 20 2019, which adds the nine economic activities indicated above to the Article 29 list. This decree comes as positive news because it expands very important ICMS tax benefits especially to the agribusiness sector, providing it with significant cashflow gains on the acquisition of fixed assets, and allows the sector to grow and become modernised.