Govt signs law guarantees transfer to states, municipalities and Federal District under Kandir Law

The transfer will be R $ 58 billion until 2037.

Dec 31, Sao Paulo: President Jair Bolsonaro signed Complementary Law 176/2020, which guarantees the transfer of R $ 58 billion to states, municipalities and the Federal District to compensate for losses in revenue due to the Kandir Law of 1996.

The amount, which will be transferred to the federal entities between the years 2020 and 2037, ends a historic impasse, as stated by the Special Secretary of Finance, Waldery Rodrigues, when detailing the way the transfer of resources will be done.

“It is a gigantic institutional advance. It is a turning point that brings a new moment to financial fiscal federalism, ”he said.

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How the payment will be made

According to the Complementary Law, published in the Federal Official Gazette, the transfer of R $ 58 billion from the Union to states and municipalities will be carried out as follows: R $ 4 billion per year, between 2020 and 2030. From 2031 to 2037, the transfer will be progressively reduced by R $ 500 million per year.

In other words, in 2031, the transfer by the Federal Government will be R $ 3.5 billion; in 2032, of R $ 3 billion, and so on, until 2037, with R $ 500 million.

Of the total instalment due, the Union will directly deliver 75% to the State itself and 25% to the Municipalities.

Additional Feature

The law also provides for an additional allocation of R $ 4 billion to states and municipalities with the proceeds generated from the auction of the Atapu and Sépia blocks. This transfer will be in a single instalment in the year in which the corresponding revenue is realized. In this case, each state will be entitled to 75% of the amount, and the municipalities, 25%. If the auctions take place in different years, the transfer will be R $ 2 billion in each year in which the corresponding revenue is realized.

For example, if they occur in 2021, the total value for that year would be R $ 8 billion, with this additional R $ 4 billion from auctions.

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Payments

It is worth noting, however, that transfers of funds from the Union to the states and municipalities are subject to the waiver of any rights against the Union.

A total of 3,851 municipalities and 19 states and the Federal District that sign the Declaration of Waiver by December 30, 2020, will receive the funds this year, December 31. The other federative entities will receive in January 2021, after the delivery of the Declaration.

Kandir Law

The Kandir Law came into effect on November 1, 1996; and regulating the application of the Tax on Operations Relating to the Circulation of Goods and Provision of Interstate, Intermunicipal and Communication Services (ICMS).

One of the rules of the Kandir Law is the exemption from the payment of ICMS on exports of primary and semi-finished products or services. For this reason, the Law has always caused controversy among the governors of exporting states, who claim loss of revenue due to tax exemption on these products.

Also, read- Brazil Govt extends zero tariffs for importing medicines and supplies against Covid-19

Minimum wage

In a press conference, the Ministry of Economy also commented on the new minimum wage of R $ 1,100 in 2021. An increase of 5.26% in relation to the current value, of R $ 1,045.

Earlier, on social media, President Jair Bolsonaro announced that the Provisional Measure with the new value, effective as of January 1, 2021, will be signed this Wednesday (30).

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