The STF (Brazil’s Supreme Federal Court) has ruled that states cannot unilaterally revoke tax benefits related to the ICMS (the state-level value-added tax) that were previously approved under agreements by Confaz (the National Council of Treasury Policy).
The Mechanics of Confaz Rules
Confaz is the council that brings together representatives from the Ministry of Finance and state finance secretaries. Under the Court’s ruling, although Confaz resolutions do not automatically implement tax changes into state laws, revoking a rule that has already been incorporated requires compliance with the council’s guidelines.
To cancel a tax benefit, Confaz requires approval from at least four-fifths of its representatives. This supermajority requirement serves as a mechanism to curb the so-called “tax war” (interstate tax competition) among Brazilian states.
The Specific Case: São Paulo and the Northern Region
The STF ruling examined lawsuits filed by the states of Rondônia, Acre, Amapá, and Roraima against a decree enacted by the São Paulo state government in 2020. The São Paulo regulation had ended the ICMS exemption for goods shipped to Free Trade Areas in the Northern Region, which encompass municipalities within the claimant states.
In January of this year, the São Paulo government reinstated the exemption, but limited the validity of the benefit only until September 30.
The Court’s Decision
The STF plenary decided the case by a 6-to-3 vote. The majority of the justices followed the opinion of the reporting justice, Justice Cármen Lúcia. The prevailing view established that the unilateral revocation of tax incentives by one state harms the other federation units.
Justices Flávio Dino, Cristiano Zanin, Alexandre de Moraes, Dias Toffoli, and Edson Fachin joined the reporting justice. In contrast, Justice Luiz Fux dissented, arguing that states possess the autonomy to revoke incentives without prior approval from Confaz. This dissenting view was supported by Justices André Mendonça and Nunes Marques.
Practical Implications
For executives, investors, and business managers engaged in interstate commerce, the ruling reinforces operational stability. The decision prevents ICMS exemptions validated by Confaz from being abruptly and unilaterally eliminated by a single state, providing greater predictability for corporate logistic and financial planning.
This content is for informational purposes only and does not constitute legal advice. For guidance on specific matters, consult a qualified lawyer.
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