With the publication of Decrees Nos. 47,767/21 and 47,768/21 on September 21, the State of Rio de Janeiro regulated, respectively, Laws Nos. 9,214/21 and 9,289/21, which define special tax treatment for thermoelectric projects in its territory.
Law No. 9,214/21, regulated by Decree No. 47,767/2021, establishes the following tax treatments:
- ICMS deferral on the following transactions carried out by the project owner or by companies that may be formally hired or subcontracted to build the power plants:
- Import of machinery, equipment, parts, pieces, and accessories for the installation of the venture, provided that they are imported and cleared through Rio de Janeiro's ports and airports;
- Internal acquisition of machinery, equipment, parts, pieces, and accessories intended for the installation of the venture;
- Interstate acquisition of machinery, equipment, parts, pieces, and accessories intended for the installation of the venture, with regard to the tax rate differential.
- Exemption from ICMS on imports of natural gas, even if liquefied, to be used in its thermoelectric power generation process.
In turn, Law No. 9,289/21, regulated by Decree No. 47,768/2021, grants:
- ICMS deferral in the successive internal operations with natural gas produced in the state to be consumed in thermoelectric power plants to the time when the electric power leaves that establishment;
- Deferral of the ICMS tax on services rendered for the transportation of natural gas produced in the state to be consumed in thermoelectric power plants to the time when the electric power leaves that establishment; and
- Exemption from the collection of the deferred tax in the event of interstate transactions with electricity.
The special tax treatments will be in force for the term of the energy auction contract expired by the applicant or by December 31, 2032, whichever occurs first.
The decrees establish that taxpayers wishing to adhere to the special tax treatment must file a request for classification with the State Treasury Department (Sefaz).
In order to apply for this tax treatment, the company or consortium must prove that it has won an energy auction held in 2021 or, in the specific case of Decree No. 47,767/21, prove that it has obtained a prior environmental license for the power plant project already installed or to be installed in the state.
Companies must support the application with all documents and information listed in the exhibits to the decrees (which include negative clearance certificates, investment forecasts, income statements, among other documents), as well as additional documents demonstrating the good standing of the company/consortium, in accordance with the requirements set forth in article 9 of Decree No. 47,201/20.
As a condition for using the special tax treatment under Laws Nos. 9,214/2021 and 9,289/2021, the decrees state that companies and consortia must commit to investing at least 2% of the variable cost relating to natural gas, calculated each year, in power generation projects using renewable sources or, optionally, in energy conservation projects or studies on the energy sector, in accordance with the specifications set forth in the laws and provided they are in the interest of the State of Rio de Janeiro.
These investments must be made in projects expressly indicated by the State Bureau of Economic Development, Energy, and International Relations (Sedeeri) or in other projects presented by the company/consortium previously approved by the bureau.
The use of funds will be monitored and inspected by Sefaz, which may require proof of investments made and the appropriate documents in determining the amounts invested.
Specifically in relation to Decree No. 47,767/21, it is hereby established that:
- once the application for classification is granted, an accession instrument will be signed between the company and the state, which will confirm the right to enjoy the benefits provided for in the decrees; and
- if the application is denied, the applicant company may, within 30 days, appeal to the State Bureau of Finance, who shall have 45 days to render an unappealable decision on the matter.
Sefaz will annually publish information related to the decrees, including the taxpayers benefited by the tax incentives.
The decrees prohibit the adoption of special tax treatment for taxpayers who:
- have an irregular tax registration with the state of Rio de Janeiro;
- have a debt with the state treasury, except when the enforceability is suspended;
- hold a stake or have a partner that holds a stake in a company with debt registered in the Outstanding Debt of Rio de Janeiro or with a state registration canceled or suspended due to tax irregularity, except when the enforceability is suspended;
- are in an irregular situation or in breach of tax debt installment payments;
- are in breach of the environmental good standing certificate or do not have one;
- are not in good standing with the FGTS or do not have a Labor Clearance Certificate (CNDT);
- are registered in the Registry of Employers who have submitted workers to conditions analogous to slave labor.
The decrees further establish that taxpayers that fail to comply with the conditions will lose their right to the special tax treatment, in which case they will have to collect the ICMS due for the transactions they would carry out and reverse any credits generated during the transaction.