ICMS exemption in Minas Gerais expires in 2022

Since December 2015, Minas Gerais has been exempt from ICMS on the excess of up to 1 MW of energy generated by distributed generation systems. This exemption is due to adherence to the ICMS Agreement 16/2015 Confaz (National Council for Financial Policy).

In addition to granting exemption from ICMS for photovoltaic projects of up to 5 MW, there is also exemption in the types of Shared Generation and EMUCs (Enterprises with Multiple Consumer Units).

In order to guarantee the continuity of the benefit, provided for in the State Law 22,549/2017, ABGD (Brazilian Association of Distributed Generation) sent a craft for governor Romeu Zema and for INDI (Integrated Institute for Economic Development).

In the document, the association highlights that the loss of validity of the law in December 2022 could impact photovoltaic DG projects in Minas Gerais. For this reason, it requests that a task force be created so that the state promotes, with INDI and SEFAZ (State Finance Secretariat), an extension of distributed generation projects.

The main objective is to avoid losses to projects that have already been implemented. Currently, State Law No. 22,549/2017, regulated by Decree No. 47,226/2017, establishes exemption for consumers with distributed micro or mini generation of photovoltaic solar energy falling within the four modalities currently provided for in REN 482 (Normative Resolution No. 482/2012) from ANEEL (National Electric Energy Agency):

• generation next to the load;
• remote self-consumption;
• enterprise of multiple consumer units;
• shared generation.

Expansion of exemption for renewable sources

Recently, Governor Romeu Zema sanctioned the State Law 23,762/2021 which expands the incentive for the production of electrical energy from renewable sources in the state and provides for the reduction of ICMS on equipment, parts and components used in the installation of micro and mini distributed generation systems in the state with a capacity of up to 5 MW. The benefit also applies to the energy generated itself.

“We demonstrate how distributed generation made from all sources can bring benefits to the state, not only generating renewable energy, but also generating jobs, reusing waste and natural resources and boosting the economy”, highlights Tayane Vieira, director of biogas at ABGD and one of the association's representatives in meetings with the state deputy who authored the law, Gil Pereira.

But what has changed?

The new law enacted provides for an increase in production capacity, from 1 MW to 5 MW for wind, biomass and hydraulic sources. “The law extends it to other sources, not limiting the exemption to photovoltaic energy. So, before we had an exemption from ICMS on energy compensation of up to 5 MW for solar sources, now with this law, we will have the extension of the tax exemption for wind, biomass and hydraulics”, explains Marina Meyer, legal director of ABGD, who also participated in the drafting of the law.

For Luiz Cláudio Gomes, Deputy Secretary of State for Finance, by expanding the sources the benefits will come not only to the state, but also to consumers and the environment. “This measure has the potential to attract more investments in this segment to Minas Gerais, which is already the state with the highest number of implementation of renewable energy projects”, he highlighted.

Fernando Passalio, Deputy Secretary of State for Economic Development, highlighted that the incentive will serve sectors with the potential to use organic matter to generate electricity through biogas, such as swine and poultry farming, but which come up against current taxation.

“This legislation, although it lacks an agreement approved by Confaz, is a sign of government support for the extension of the benefit already granted to solar energy to other sources. We believe that this expansion of distributed generation to new sources can bring more investments to the state, with social, environmental and economic gains”, he said.

Change is not immediate

The new law is not yet in force. First, it needs to be validated by Confaz (National Council for Financial Policy) and approved by all units of the federation, being transformed into an agreement to then come into force. “The next step is the ratification of the exemption by Confaz, to finalize the process and the incentive to be granted”, explains Marina.

According to ABGD, the association is already working to achieve the benefit for all sources of DG and has already scheduled a meeting with the Finance Department of the State of Minas Gerais for February.

After the law is validated and approved by the bodies, interested parties will be able to join the agreement to enjoy the benefit, as imposed by Complementary Law 160/2017, which deals with tax benefits granted by the federation entities.

Electric vehicles

The sanctioned law also provides for exemption from IPVA for vehicles powered by vehicular natural gas (CNG), manufactured in the state, in the year following their acquisition. Currently, Minas Gerais is the second automobile hub in the country. In 2018, the state was responsible for 13% of national vehicle production.

According to the Institute for Integrated Development of Minas Gerais, among the main anchors in the sector, the most notable are Fiat, which has operated in Betim since 1976, Mercedes-Benz, which established itself in Juiz de Fora in 1999, and Iveco, which has been in Sete Lagoas since 2000.