07/07/2026
The Brazilian Supreme Federal Court (“STF”) has recognized the general repercussion of the constitutional issues raised in Extraordinary Appeal No. 1,424,015 (Theme 1,465) and will rule on a matter of significant importance to the industrial sector: whether the acquisition of intermediate products that are not physically incorporated into the final product entitles taxpayers to claim ICMS tax credits.
In general terms, the dispute concerns the scope of the ICMS credit system established under the Brazilian Lei Kandir (Complementary Law No. 87/1996), which governs the tax and provides, under Articles 20 and 33, II, for the possibility of claiming ICMS credits on intermediate goods used or consumed in the taxpayer’s business activities. The tax authorities argue that such credits are available only for goods that become physically incorporated into the final product, whereas taxpayers contend that credits should also be allowed for inputs that, although not incorporated into the finished product, are essential to the manufacturing process.
As highlighted by Justice Nunes Marques, the reporting Justice, in his opinion recognizing the general repercussion of the case, the STF’s case law on this matter is not yet settled. Although the Court has previously addressed the merits of the controversy, its prevailing position had been that the issue involved the interpretation of ordinary federal legislation rather than constitutional law, and therefore fell within the jurisdiction of the Superior Court of Justice (“STJ”), rather than the STF.
To date, the STJ’s position has been favorable to taxpayers, holding that ICMS credits may be claimed whenever the intermediate goods are essential or relevant to the production process, without requiring proof that they are entirely and immediately consumed or physically incorporated into the final product.
Although no hearing date has yet been scheduled, the STF’s decision will definitively resolve the constitutional issue and may have a significant impact on Brazil’s industrial sector.
Our Tax team remains available to discuss this matter, assess its potential impact on your business, and advise on the appropriate measures that may be taken in connection with Theme 1,465.
Authored by: Thais Ribeiro Bernardes Casado and Lívia Mauerberg Muscari.
