The state of São Paulo could lose its leadership in solar energy generation in Brazil if it does not renew the ICMS (Tax on Circulation of Goods and Services) benefit for its own generation of renewable energy, which expires at the end of this year.
A ABSOLAR (Brazilian Association of Photovoltaic Solar Energy) warns of the urgent need for the São Paulo government to align the ICMS benefit for the self-generation of solar energy with other states in the Southeast.
The entity's recommendation is to adopt the same conditions applied in Rio de Janeiro, Espírito Santo and Minas Gerais, whose rules are in force until 2032.
The association suggests that the São Paulo government promote adjustments to Decree No. 67.521/2023, which regulates ICMS in the state, in order to align São Paulo's conditions with those of other states, ensuring the state's competitiveness in the solar sector.
For Thiago Bao, a tax specialist in the energy sector, it is essential to recognize that the ICMS exemption played a central role in promoting the generation of renewable energy, especially solar energy, in states in the Southeast.
According to the expert, in the case of São Paulo, the non-renewal of this benefit will compromise the state's competitiveness, resulting not only in a setback in the advancement of clean energy, but also in serious economic impacts, such as the closure of companies and the loss of thousands of jobs.
“In addition, the exponential growth in self-generation, observed in recent years, was directly driven by the tax security brought by this exemption, and its maintenance is essential to guarantee the sustainable advancement of the sector,” he commented.
ICMS
ICMS is a state tax that is levied on the sale and consumption of electricity. It is charged on transactions, from production to the end customer. In the case of solar energy, it is not levied on energy generation, but rather on energy consumption.
Bao explains that when consumers use energy from the distributor, the state charges a percentage, which currently varies between 17% and 18%, on the value of the energy consumed. However, for self-generation of energy, there is an exemption from ICMS on the part that is compensated.
“For example, if the consumer generated 200 kWh and consumed 300 kWh, he offsets 200 kWh with his own generation. Therefore, he will not pay ICMS on these 200 kWh offset, only on the remaining 100 kWh”, he explains.
“This represents a great benefit, as the exemption from tax on compensated energy leaves more money in the consumer’s pocket. This money can be used to pay for the investment in the generation system,” he adds.
“Therefore, the ICMS on distributed energy is an important tax, but when there is an exemption for self-generation, it encourages projects and ventures in the sector”, he concludes.
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