Amal Nasrallah

The STF (Supreme Federal Court) decided, with general repercussion (RE 593824 – Rapporteur Ricardo Lewandowski), that the demand for electrical power in itself is not subject to taxation by the ICMS (Tax on Circulation of Goods and Services) and that the tax state falls on actual consumption. The Brazilian Supreme Court (STF) established the following legal precedent: "The demand for electrical power is not, in itself, subject to taxation via ICMS (a Brazilian state tax), since only the values related to operations in which there is effective consumption of electrical energy by the consumer are included in the tax base of this tax." This means that companies that require a lot of energy typically contract directly with electricity concessionaires for a fixed power reserve called contracted demand. Contracted demand is simply the amount of energy made available by the utility company to the client (company). The company pays a pre-agreed price, and payment is made regardless of whether the energy made available is actually used. In other words, the mere availability of electricity, even if it is not actually used, creates an obligation for the company to pay the utility company. With the advent of the 1988 Federal Constitution, electrical energy began to be considered a commodity for ICMS taxation purposes. The event chosen as the triggering factor was the "circulation of goods," with "circulation" understood as the transfer of goods from one person to another, presupposing the transfer of possession or ownership. Therefore, what triggers the application of ICMS (a Brazilian tax on goods and services) to electricity is the circulation of the commodity that corresponds to the effective transfer of "electricity" to the consumer. In view of this, some large energy consumer companies have filed lawsuits alleging that it is not possible to consider the simple placing of electrical energy at the disposal of the consumer as a taxable event for ICMS, because as long as there is no effective circulation there is no transfer of possession or property, nor the tax-generating event. In the case of electrical energy, the circulation that transmits possession or property is only consolidated at the moment the energy leaves the transmission line and enters the consumer's establishment. Therefore, as long as the energy remains in the concessionaire's transmission lines, there is no way to consider the triggering event to have occurred, especially because the energy flows freely through the transmission lines without a specific recipient, and if it is not used it may even be sold to other consumers. If the ICMS calculation basis is the value of the operation resulting in the delivery of the product to the consumer, and this delivery occurs when the electrical energy leaves the transmission line and enters the consumer's establishment, there is no doubt that this value corresponds to the electrical energy actually consumed. The Superior Court of Justice had already considered the issue and decided in favor of taxpayers and ended up editing Summary 391 with the following content: “The ICMS is levied on the value of the electricity tariff corresponding to the demand for power actually used”. The STF also delivered another judgment extremely favorable to taxpayers, as it decided in a special appeal representing the controversy submitted to the system of 543-C of the old CPC, that companies that unduly paid ICMS on unused energy, that is, the user of the energy service, have the right to request a refund of state tax (Special Appeal 1.299.303/SC).

Amal Nasrallah

Published articles

STF rules that ICMS is not levied on contracted demand