The Brazilian Supreme Court (STF) unanimously decided to annul sections of state laws in Paraíba and Rio de Janeiro that increased the ICMS tax on telecommunications and electricity services to finance poverty alleviation programs.
However, to avoid an immediate impact on public finances, the ministers decided that the levy may continue to be applied until December 31, 2026. Thus, the cancellation of the extra rates will only take effect from January 1 of next year.
The decision upheld the position of the Federal Public Prosecutor's Office (MPF), which questioned the constitutionality of the additional 2% charge applied to these sectors. According to the ministers' understanding, the creation of this surcharge was based on provisions of the Transitional Constitutional Provisions Act (ADCT), but ended up exceeding the limits established by law.
State regulations stipulated the collection of taxes on telecommunications and electricity in the case of Rio de Janeiro, and only on telecommunications in Paraíba. These regulations were enacted at a time when there was still no federal law defining which products and services could be classified as "superfluous," a condition that would allow for the application of higher tax rates.
This scenario changed in 2022, when a federal complementary law established that services considered essential cannot be subject to higher ICMS (state sales tax) rates compared to other operations. Telecommunications and electricity are among these essential services.
Based on this understanding, the Supreme Federal Court (STF) concluded that the additional charges levied by the states can only be considered valid until 2022. However, to avoid immediate impacts on public finances and preserve ongoing state revenue, the justices decided to modulate the effects of the decision.
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