STF Rules that ICMS is not Incurred in the Transfer of Goods between Establishments of the Same Taxpayer – ADC 49


On April 12, 2023, the STF concluded the judgment of ADC 49 in which it was decided that the collection of ICMS (Value Added Tax on Sales and Services) on the transfer of goods between establishments of the same taxpayer is prohibited starting in 2024, declaring the unconstitutionality of article 11, § 3, II, 12, I, in the section “even to another establishment of the same owner,” and 13, § 4, of Federal Complementary Law No. 87, dated September 13, 1996¹. In addition, it was established that states have until the end of this year to regulate the use of accumulated credits until then. The controversial issue was decided by a vote of 6 to 5.

For the Rapporteur of the case, Minister Edson Fachin, internal acts and degrees of processing within the establishment cannot be considered elements of economic and legal circulation because they are simple physical or material acts of the production process.

In other words, these acts do not generate economic or legal movement that justifies taxation by ICMS. Therefore, the transfer of goods between establishments of the same taxpayer is considered irrelevant for the purposes of ICMS taxation, as it is only a physical movement without significant economic or legal impact.

It is worth noting that in April 2021, the STF had already ruled in this direction when judging the action proposed by the State of Rio Grande do Norte, but at the time, a secondary issue arose: the ICMS credits obtained from previous operations that taxpayers use to offset the tax in subsequent operations, due to the non-cumulative nature of ICMS.

The possibility of using ICMS credits is an important point in this case. The ICMS regime is non-cumulative, which means that the tax paid by the company in the previous stage, when purchasing goods for resale, serves as a credit to be offset in the subsequent stage. With the STF’s decision in April 2021, the use of the credit would be restricted to the state of origin of the goods, which would create an imbalance in the cash flow of companies. Therefore, the ministers had to define from when the decision overturning the ICMS collection would be effective and how the use of credits would be regulated.

After many months of waiting, the STF ruled that states have until the end of the year to regulate the use of these credits accumulated by taxpayers. If this does not happen, they will be free to make transfers without reservations and limitations. The decision is positive for retail companies, which can take advantage of these values, generating significant savings for their operations.

Finally, in a plenary session held on April 19, 2023, the STF decided to modulate the effects of the decision, in accordance with the Rapporteur Minister’s vote, which means that the decision in favor of taxpayers will only take effect from January 2024. Until then, states will continue to charge ICMS on interstate transactions until the end of 2023, except for administrative and judicial proceedings pending completion by the date of publication of the judgment decision in ADC (April 29, 2021). In this case, taxpayers with a favorable administrative or judicial decision will not only be exempt from paying ICMS on these operations but will also be entitled to a refund of amounts previously charged, subject to the five-year statute of limitations for the collection of tax credits.
¹ § 3 For the purposes of this Complementary Law, an establishment is the place, whether private or public, built or not, owned by individuals or legal entities, where individuals or legal entities carry out their activities on a temporary or permanent basis, as well as where goods are stored, subject to the following provisions: I – in the impossibility of determining the establishment, it is considered as such the place where the operation or provision was carried out, where the goods were found, or where the provision was verified; II – each establishment of the same owner is autonomous; (See ADC 49) Art. 12. The occurrence of the taxable event of the tax is considered to have taken place at the time: I – when goods leave the establishment of the taxpayer, even if for another establishment of the same owner; § 4 In the case of goods leaving an establishment located in another state, belonging to the same owner, the tax base is: I – the amount corresponding to the most recent entry of the goods; II – the cost of the goods produced, understood as the sum of the cost of raw materials, secondary materials, labor, and packaging; III – in the case of non-manufactured goods, their current price in the wholesale market of the sender’s establishment.


Stay updated on the latest news and bulletins in the tax and corporate sectors.

    By providing my data, I agree to the Privacy Policy.