Brazil’s Supreme Court Finalizes Judgment of Opposed Requests for Declaration in ADC 49

On April 19, 2023, the Brazilian Supreme Court concluded the trial of the motion for clarification filed in the Action for Declaration of Constitutionality ("ADC") no. 49, which discussed (i) the modulation of the decision’s effects that recognized the non-levy of the Tax on Circulation of Goods ("ICMS") on the transfer of goods between establishments of the same owner, including interstate transfers, and (ii) the possibility of transferring ICMS credits between establishments in different states.

In the virtual trial session, two theses were proposed for the trial of the motion for clarification:

• Thesis of Reporting Minister Edson Fachin (with six votes): the decision in ADC No. 49 would only take effect in 2024, except for the administrative and judicial proceedings pending conclusion until the publication date of the ADC no. 49 trial minutes, it also being the states' responsibility to regulate the transfer of ICMS credits among establishments of the same taxpayers. However, if the states do not regulate the matter within this term, the taxpayers' right to transfer ICMS credits would be automatically recognized.
• Thesis of Minister Dias Toffoli (with five votes): the decision in ADC no. 49 would produce its effects as of 18 months from the publication of the trial minutes, except for lawsuits filed until the publication date of the trial minutes. On the transfer of ICMS credits, the minister understands that it is for the Brazilian Congress to regulate the matter, so that if the law is not published within the 18-month period, the taxpayers may appeal to the Judiciary.

However, due to discussion over whether or not the quorum of eight ministers required by article 27 of Law 9868/1999 would be necessary only to determine the effects´ modulation, and whether such a quorum would also be necessary to define the extension of the modulation, the court decided to suspend the trial in virtual session in order to proclaim the result in an in-person session.

Thus, in the April 19, 2023 session, the president of the Brazilian Supreme Court, Minister Rosa Weber, proclaimed the result of the trial in accordance with the vote of Reporting Minister Edson Fachin, to modulate the effects of the decision of ADC no. 49 in order for it to only take effect in 2024, except for those administrative and judicial proceedings pending conclusion until the publication date of the ADC no. 49 trial minutes (04.29.2021). Upon expiration of the term without the states regulating the transfer of ICMS credits between establishments belonging to the same taxpayer, the taxpayers' right to transfer such credits is hereby recognized.