São Paulo reduces ICMS-ST product list by 72%

The State of São Paulo is significantly reducing the number of products subject to the ICMS tax substitution (ICMS-ST) regime. Starting in February 2027, 74 products, including construction materials, microwaves, and margarine, will be removed from this system. This move reduces the total list from 749 to 208 items, representing a 72.2% decrease.

Under the ICMS-ST regime, tax is paid in advance by a single participant in the commercial chain, typically the manufacturer or importer. Following this change, companies will calculate and pay the tax at each stage of the sale, returning to the standard taxation system. The State Secretariat of Finance and Planning (Sefaz-SP) stated that this transition will not affect total tax revenue but will improve cash flow for businesses by eliminating the need for advance payments.

This initiative is part of the broader tax reform process, which aims to gradually phase out the substitution model entirely by 2032. In a separate but related development regarding the national tax reform, companies seeking to join the Simples Nacional regime for 2027 have until Friday, October 30, to regularize pending issues. Under the new rules, Simples Nacional participants must choose between a pure simplified model or a hybrid model that allows for the separate collection of IBS and CBS to facilitate tax credits.