11.9% inflation prompts Brazil to limit ICMS (VAT) on range of supplies to 18%; states to challenge as unconstitutional
Brazil has limited states freedom (Complementary Law 194/2022) to charge ICMS above the standard rate of 18% on a range of supplies, including
- Petrol and fuel
- Natural gas
- Public transport
Generally, states may only charge 17% or 18%. A number of states will challenge the cap as unconstitutional. ICMS on these supplies accounts for around 25% of many states’ total tax revenues
ICMS, Imposto sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual e Intermunicipal e de Comunicações – is an indirect tax which applies to the movement of goods, transportation, communication services and other general supplies of goods. The current tax level is between 7% and 25%
Brazil VAT reform has been attempted many times, with a bill in the Senate at the moment.