Understanding ICMS Interstate Tax Calculation Rules (9.2 Update)

Constitutional Amendment 87 resolves the issue on the sharing of Brazilian State VAT revenue (ICMS) between the selling and buying states. Earlier, in an interstate transaction, if the buyer is a non-ICMS taxpayer, the ICMS amount was fully collected by the origin/selling state according to the internal tax rate.

Amendment 87 establishes a new ICMS tax calculation and validation rules that apply in the following ways to an interstate transaction:

• The ICMS interstate tax rate is applied and paid to the origin/selling state.

• ICMS differential (difference between the destination internal tax rate and interstate tax rate) is gradually transitioned from the origin/selling state to the destination/buying state.

Amendment 87 in Article 99 stipulates that on a transitional basis the ICMS differential amount will be shared between the origin and destination states as follows:

Year	Destination State	Origin State
2016	40%	60%
2017	60%	40%
2018	80%	20%
2019 onwards	100%	0%

Amendment 87 also mandates that the Brazilian Fund for Combating and Eradicating Poverty (FECOP) that was earlier incorporated in the ICMS amount should now be separated from the ICMS amount and shown in the NF-e XML.