Ricardo Tosto explains how ICMS is not levied on the insurance contract with an extended duration:
The Treasury sometimes interprets the law literally and in its favor, often causing an increase in tax collection. However, it usually ignores the constitutional principles of taxation, the legal system as a whole, and the context that should be taken into account while the process of interpretation takes place. It is an excellent example of this apparent trend that the State Treasury always charges ICMS on the premiums paid on insurance with an extended term, assuming that such values are included by the sellers in the final price of the merchandise and, therefore, should be included in the tax base. To give legal support to this argument, Ricardo Tosto argues that Article 13, § 1, II, “a,” of Complementary Law 87/96 states that insurance paid should be included in the ICMS calculation basis since LC does not except or limits this rule.
However, Ricardo Tosto affirms that the taxpayers do not agree with this point of view. The claim is that, under a broader and more systematic interpretation, CL only provides that insurance premiums, arising from obligations assumed under the Consumer Protection Code (Articles 24 and 26), should be taxed by ICMS. By selling their products, CDC obliges sellers to ensure the perfect conditions of use of these products to consumers within 90 days (warranty period). In the event of a defect, sellers must replace or refund the value to consumers; if not, they run the risk of being prosecuted and sentenced to the payment of indemnity. To meet the CDC, sellers hire insurers to cover expenses related to the repayment of securities or replacement of defective products. Ricardo Tosto stresses that it is important to note that premiums paid from insurance are transferred to the final price of products and charged by consumers as a condition of a business. Thus, it makes sense to subject them to ICMS taxation.
In the meantime, once the legal guarantee period established by the CDC (or even earlier) has expired, there is nothing to prevent consumers from entering into a new, longer-term insurance contract to protect them from potential risks about the products purchased. In this case, the values of the premiums will be borne directly by the consumers, which contrasts with the previous scenario (when they were transferred to the final price of the products). It is also necessary to point out that such a contract is independent of the purchase and sale of the products and is therefore subject to another legal regime (Resolutions 122/2005 and 296/2013 of the National Council of Private Insurance).
Consequently, premiums paid in respect of such contract cannot be taxed by ICMS, since they are not related to the price paid for the products purchased. Also, these premiums will be received by the insurer as its revenue. In this case, sellers cannot be required to pay the ICMS. Otherwise, they would be paying tax on the revenues of third parties, a situation that can be considered as a violation of the tax principle of the ability to contribute.
On this matter, the Superior Court of Justice, in a special appeal, was asked to rule. Ministers recently decided in favor of taxpayers (Special Appeal No. 1,346,749-MG). The conclusion was that the amounts paid for insurance for an extended duration, which the consumers hired separately (when acquiring goods), cannot be taxed by ICMS. This judicial precedent does not refer to any paradigmatic case. It is only an isolated decision and has no binding effect. However, it can be considered as a major victory for taxpayers, which may influence future decisions by judges.