The collection of default interest over VAT tax by the State of São Paulo
Are we finally able to prevent the State of São Paulo from collecting exorbitant default interest rates on VAT (ICMS) tax debts?
For almost a decade, the São Paulo State abused its power by charging exorbitant default interest on VAT (ICMS) Tax debts. Since 2009, with the enactment of Law No. 13,918, default interest has been charged at a rate of 0.13% per day (approximately 47% per year), far above the Selic rate (Bank’s overnight rate in Brazil) that was less than 11% in that year.
The taxpayers rebelled themselves. There were numerous administrative and judicial claims to dismiss the collection of such interest. In February 2013, São Paulo Court of Appeals analyzed the matter and ruled unconstitutional the collection of default interest rates above the Selic rate.
Only four years later, in July 2017, the State of São Paulo enacted Law No. 16,497 recognizing that, as of November of 2017, the default interest rate over VAT tax debts should be the Selic rate. The law, however, prevented taxpayers from getting refunds for the overpayments made before that date.
The discussion reached the Supreme Court (STF) that, last month, finally ruled (with binding effect to lower courts) that Selic rate is the limit!
Was this the end of discussions? Well, not quite.
Surprisingly, STF decisions can only be followed by authorities of the São Paulo State upon a declaration in a Direct Action of Unconstitutionality (ADIn), a binding precedent, or when its effects are suspended by the Senate.
Thus, it is necessary to wait for a position from the State of São Paulo and the State General Attorney authorizing the end of discussions in order to apply the STF decision and prevent the collection of interest higher than the Selic.
Until then, for those who need to pay their debts subject to the interest provided in the legislation of 2009, they still need to file a lawsuit requesting that STF decision be applicable. At the administrative level, it is not possible to rule out abusive interest. But in the judicial level, taxpayer´s victory is now certain.
Taxpayer should stand up! After all, “many little strokes fell great oaks”. The State of São Paulo, sooner or later, will solve this issue and end this discussion with only one possible ending: interests must observe the limits set by the Selic rate.
By Tatiana Del Giudice Cappa Chiaradia, partner at Candido Martins Advogados