Rio de Janeiro State now requires the additional amount destined to the Fund to Fight Against Poverty – FECP in operations with essential products and services

In brief 

The Rio de Janeiro State Revenue has recently modified its interpretation regarding the collection of the Fund to Fight Against Poverty (“Fundo Estadual de Combate à Pobreza – FECP”) additional over transactions with communication services and power supply. This change impacts taxpayers engaged in the performance of corporate network services, among others.

In more detail

Up to July, 2022, the Rio de Janeiro tax authorities have been responding to taxpayers through its website that no FECP would levy over the performance of communication services as under Decree # 48.145/22.

However, since the beginning of 2023, the Rio de Janeiro State Revenue Secretariat altered its interpretation and has been notifying taxpayers in the power and communication sectors that they are subject to the FECP. The rationale behind this change is that the FECP additional was created by Law # 4.056/02, which remains in force and was not modified by Decree # 48.145/22.

Specifically regarding communication companies, the Rio de Janeiro State Revenue, while ruling Request for a Ruling 006/2023, stated that “the internal ICMS rate applicable to communication/telecommunications services is currently 18% in accordance with Decree # 48,145/2022, without prejudice, as expressly determined by the Secretary of Finance and in accordance  with art. 276 of Decree-Law 05/197, to the additional rate destined to finance the Fund to Fight Poverty (FECP) referred to in item II of art. 2 of Law 4056/025.”

Notwithstanding the above, we understand that taxpayers have sound grounds to challenge the imposition of the FECP over both communication services and power supply since, as provided by article 82 of Transitory Constitutional Provisions Act of the Brazilian Constitution, the Brazilian States and the Federal District may create funds to fight poverty with resources arising from the imposition of an ICMS additional over transactions with non-essential goods and services only, while communication services and power supply have been acknowledged as essential by the Brazilian Supreme Court and STF (Theme 745) and LC 194/2022.