Example of Poverty Fund Calculation with ICMS Differential Calculation

For example, if the state Rio de Janeiro (RJ), which has an Internal Tax Rate of 19%, has adopted the poverty fund and allocated 1% of the ICMS Internal Rate towards the poverty fund, then the Internal Tax Rate of the state for ICMS Differential calculation would be 18% instead of 19%.

When an interstate transaction between São Paulo (SP) and Rio de Janeiro (RJ) is for a line amount of R$12,000, then:

ICMS Internal Tax Rate of SP = 18%

ICMS Internal Tax Rate of RJ = 19% - 1% (Poverty Fund) = 18%

The ICMS poverty rate is applied on the ICMS tax base of the destination state.

Interstate Tax Rate between SP and RJ = 12%

ICMS Poverty Amount = 1% of R$12,000 = R$120

ICMS Diff amount = ICMS Internal Tax Rate in RJ - Interstate Tax Rate (18% - 12% = 6%)

In this example, the ICMS Interstate Tax Rate paid to Selling State = 12% of R$12,000 = R$1440.00

ICMS Differential amount = 6% of R$12,000 = R$720

This ICMS Differential amount (R$720) will be shared between SP and RJ and transitioned gradually to RJ (destination state) as explained in the above section.