ICMS in Self-production of Electricity in the Free Energy Market

Abstract

Regulatory legislation allows energy self-production by the consumer at their own establishment (local self-production) and at another location (remote self-production). In remote self-production, the self-producer can build their own power plant or lease it from third parties, either individually or jointly with other companies in a consortium, as well as acquire energy from another legal entity under the self-production by equivalence model. ICMS tax is only levied when there is a commercial act that results in a change of ownership of the goods, which does not occur in the production of goods consumed by the producers themselves. Nevertheless, there are practical difficulties in applying this understanding when self-produced energy is transferred to another establishment of the same owner, given the rules for attributing tax liability and ancillary obligations. Therefore, it is important to analyze the ICMS levy implications on different energy self-production models, considering the logic of non-cumulative taxation.