On October 2, 2025, the Department of Finance and Planning of the State of São Paulo issued Ordinances SRE No. 64 and No. 65, introducing one of the most significant changes in recent years to the ICMS Substitution Tax (ST) system.
The new rules will take effect as of January 1, 2026, directly impacting several sectors of São Paulo’s economy.
What Changes in Practice?
- Exclusion of more than 130 goods from the ST regime, distributed across 12 economic segments. Among them are pharmaceuticals, alcoholic beverages, lamps and reactors, auto parts, juices, coconut water, snacks, glass, bricks, and other construction materials.
- Full revocation of Annexes IX and X of Ordinance CAT 68/2019, which previously covered pharmaceuticals and alcoholic beverages, respectively.
- Exclusion of items from other annexes (XIV, XV, XVI, XVII, and XX), thereby simplifying the list of goods subject to the regime.
- Existing inventories as of 12/31/2025 must be adjusted in accordance with Ordinance CAT 28/2020, ensuring a proper transition between regimes.
- Financial adjustments may be paid in up to 24 monthly and consecutive installments, starting in January 2026, mitigating the immediate cash flow impact on companies.
Why Did the State Adopt This Measure?
The official justification is to simplify the tax system and prepare São Paulo for the upcoming Tax Reform on Consumption, which will replace ICMS with IBS/CBS.
In addition, the exclusion from the ST regime is expected to:
- Reduce bureaucracy and compliance costs for companies;
- Improve cash flow, since ICMS will no longer be collected in advance;
- Reduce tax litigation, especially refund claims related to ICMS-ST overpayment, where the actual retail price was lower than the presumed taxable base.
Expected Impacts for Companies
The changes have immediate effects on the fiscal and operational routines of companies. Key points of attention include:
- Pricing and Price Formation
- Products excluded from the ST regime will now have ICMS calculated on the actual transaction value, requiring updates to pricing tables and profit margins.
- Inventory Management
- Inventories existing as of December 31, 2025 must undergo a specific inventory assessment in accordance with Ordinance CAT 28/2020.
- Financial Planning
- Despite the possibility of 24-month installment payments, companies will need to organize cash flow to accommodate the inventory adjustment and the new tax collection method.
- Accounting and Systems Compliance
- ERP and accounting systems must be updated to differentiate goods that remain under the ST regime from those that are no longer subject to it.
- Interstate Operations
- Companies operating nationwide must remain attentive: the exclusion of ST in São Paulo does not imply that the same products will cease to be subject to ST in other states.
Recommendation
Companies should immediately begin preparing for this transition, by reviewing internal procedures, adjusting systems, and reassessing pricing and compliance strategies.
Our firm is closely monitoring this matter and is available to assist your company in impact assessment, accounting and tax adjustments, and the implementation of measures necessary to ensure a safe and efficient transition.