WHOLESALER COMPETE UPDATED

Since the 10.568 Law, published in the DOE at 27\07\2016, the Wholesaler Compete became effective in accordance with its article 16, bringing some modifications in its form and operationality, what brought me to present a brief story of its legal device, as well as a very simple example, by way of ilustration.

I would like to point out, once more the Wholesaler Compete is not the only type of Compete on ES (there are several Competes, highlighting to the Compete for Non-Presence Sale, commonly known as “Compete e-Commerce” and the Transport Compete – all objects of text already published by me, on my website https://www.oliricacunha.com.br/en/tax-attraction-of-es and on http://www.administradores.com.br/u/oliricacunha/artigos/ where publications of other important legal incentives from Espírito Santo are found).

Altogether, the Wholesaler Compete was designed to make the wholesaler companies in ES more competitive, not encouraging the direct importation, such as happens in Compete e-Commerce and on others importation incentives (Fundap and Invest Industry).

Therefore, the holder of Wholesaler Compete operates with benefits for national and/or imported goods, provided through other importing companies (commonly known as tradings), even though these goods are cleared in other units of the federation.

I take this opportunity to warn: companies that are beneficiaries of Compete Wholesaler can not make imports with deferral of ICMS, as it happens in Compete e-Commerce. They need to import through incentive tradings if they want to reduce the tax burden on their imported goods. To obtain the Compete Wholesaler, there must be a unit in the ES, in any municipality in the state, and may even be a Subsidiary (its main CNAE must be the “wholesaler”), which allows its central administration to continue in the its original state, usually in that UF in which its registered office is located.

The caput of article 16 establishes that the company, within the Compete Wholesaler “shall, at each calculation period, reverse the amount of the debit registered as a result of its interstate departures, destined for commercialization or industrialization, percentage so that, after use of the corresponding credits calculated in the period, the effective tax burden results in the percentage of an integer and ten hundredths percent “(emphasis added).

This wording brings many doubts to entrepreneurs and executives, especially those from outside the ES who seek this incentive as a way to reduce their tax costs, however I always warn that a simple way of interpreting through numbers is to make the count of 1, 1% of ICMS on their interstate departures (the taxable ones, that is to say those subject to the payment of the ICMS), forgetting the credits deriving from the respective acquisitions of their merchandise.

It is not that this means “throwing away” the credits of this tax, but in the end, in fact, the tax impact is exactly that: effective, final tax burden for interstate exits of 1.1%. Here’s an example:

ComprasValor contábilBase de cálculo AlíquotaICMS 120.000,00 120.000,0012% 14.400,00 58.000,00 58.000,004% 2.320,00 Total178.000,00 16.720,00 Vendas Interestaduais Valor contábilBase de cálculoAlíquotaICMS 243.000,00 243.000,0012% 29.160,00 Total 243.000,00 29.160,00 Apuração CréditoDébitoICMS Recolher sem beneficio16.720,0029.160,0012.440,00CréditoDébitoICMS Recolher COMPETEEstorna29.160,002.673,00

Among its fences it is necessary to emphasize: Paragraph 3. The provisions of this article do not apply to operations: I – with coffee, electric energy, lubricants, liquid and gaseous fuels, petroleum derivatives and non-petroleum, and interstate and intermunicipal transportation and communication services; II – destined goods to final consumer; III – with goods subject to the tax substitution system already acquired with withholding tax; IV – with cocoa and fresh black pepper and bovine leather; V – for the sale or remittance of any merchandise or goods, in cases where the purchaser or consignee located in another unit of the Federation determines that the alienating establishment or sender located in that State promotes its delivery the consignee located in this State, even in the case of sale to order; VI – in the transfer of goods or imported goods subject to the effects of Resolution 13 of 2012, of the Federal Senate. In the meantime, the fence related to the goods subject to the ICMS-ST is extinguished as soon as the company obtains the Special Regime of Substitute Taxpayer of the ICMS-ST – REOA, incentive with which we also work and that has article published https://www.oliricacunha.com.br/en/special-regime-of-the-substitute-taxpayer-es-icms-st. Another important point is that it is no longer forbidden to use the Compete Wholesaler for goods imported under the Fundap nor for goods imported through other UFs, as I said in one of the previous paragraphs. Relevant aspect is that for some time it has been allowed, within the scope of the Wholesaler Compete, its use in the case of operations carried out for the final consumer, since it is not a natural person and hence the incentive percentages follow the same as those contemplated by Compete Venda No Presencial – e-Commerce, namely:

Paragraph 7 The provisions of this article also apply to operations that assign goods to a legal entity, as final consumers, not taxpayers, in which case the effective tax burden should result in the following percentages:

I – as of January 1, 2016, one and five tenths percent;

II – as of January 1, 2017, one and twenty-five hundredths percent; and

III – as of January 1, 2018, one and one tenth per cent.

8 The percentages provided for in paragraph 7 absorb the portion to be shared in accordance with the provisions of clause tenth of ICMS Agreement 93/15.

This incentive must be requested from the State through the Headquarters – Department of Development of the ES, through a process in which the wholesaler is requested to join the Contract of Competitiveness established between Sincades (union of wholesale companies) and the Government of ES through Headquarters. It is valid for one year and must be renewed every year between January and March of the year following the approval of the incentive.

Obviously, the calculation of this incentive has some peculiarities and the elaboration of its spreadsheets of calculations and controls demand a lot of mastery in relation to its elaboration, but nothing that a good accountant with expertise in the subject is not able to perform.

We advise, however, to carefully analyze the choice of the professional that will be hired to attend your company, if you choose to install a unit in the ES, which holds any of our incentives.

During all these years of my activities in the area (I opened my first accounting office in 1992) I have already encountered absurdities, which go beyond the question of errors in monthly ICMS calculations encouraged. From finding companies that used a certain incentive without having the right to not even have a line of registration of such incentives. Total lack of professional responsibility! We are a business advisory office, with a wealth of experience in tax incentives, business feasibility projects, obtaining these incentives, monthly tax assessments and attendance to ancillary obligations, and may or may not do the accounting part of the company once we work, always in with the needs and particularities of each enterprise. We developed spreadsheets with simulations of incentive calculations, reflections explained in DREs (monthly earnings statements – one of the accounting reports usually used), comparing profitability and tax consequences in the Real Profit, Presumed and Simple National Profit. Our understanding and professional experience have already proven us that, only in possession of such reports is that a manager has the conditions to make (right) decisions, especially regarding the opening of new business.