Rio de Janeiro State Law # 8,926/2020 – Tax benefits regime to steel manufacturing industry

The Rio de Janeiro State enacted, on 31st July 2020,  State Law # 8,960/2020, granting a special ICMS tax regime for steel sector industries located in Rio de Janeiro State.

Note that the incentives provided by this new law were originally created by State Decree # 46,793/2019, now revoked. Accordingly, the main purpose of State Law # 8,926/2020 was to guarantee that the relevant incentives would continue available for steel sector industries, now duly grounded by law.

Among the tax incentives reintroduced by the new law, let us highlight:

• ICMS deemed tax credit in internal and interstate exits, so that the rates results in 3% (three percent), without right to credit, but already including the 2% (two percent) surplus of the “Fundo Estadual de Combate à Pobreza e às Desigualdades Sociais (FECP)”;

• ICMS deferral in some operations, such as: (i) equipment import without similar produced in the State of Rio de Janeiro, (ii) acquisition of goods destined to fixed assets, (iii) imports of inputs and raw materials destined to manufacturing process, provided that there are no similar goods from Rio de Janeiro based suppliers, and (iv) internal acquisition of inputs and packaging destined to the manufacturing process;

• deferral of the ICMS levied over “manufacturing upon request” (industrialização por encomenda“) transactions carried out by manufacturers located in the State of Rio de Janeiro, so that the ICMS payment occurs by the time of the subsequent transactions performed by the contracting party; and

• reduction of the ICMS tax basis for 12% (twelve percent) on the domestic sales of industrialized steel.

Note that taxpayers enjoying the above referenced incentives must comply with the obligation of depositing 10% (ten percent) of ICMS which would be paid without the incentive at the “Fundo Orçamentário Temporário” (FOT),.

State Law 8,926/2020 entered into force at its date of publication and shall be enforceable as from the first month after its registration and deposit with the Executive Secretariat of CONFAZ.

The State of Rio de Janeiro must register and deposit the new Law at the CONFAZ until 31 October 2020, which is the last day of the third month following its publication. In this sense, we expect that State Law 8,926/2020 will take full effects from November 2020.