Brazilian exporters are legally entitled to use or to transfer the State ICMS tax which is excluded from their exports to foreign countries. This right is granted by Complementary Law 87/96, known as Law Kandir.

The amounts corresponding to the ICMS tax exclusion may be assigned to other ICMS taxpayers and may also be used as currency for payment to suppliers.  

The purpose of the law is to relieve exports from local taxes and help Brazilian exporters to compete abroad.

However, Brazilian exporters may end up with more ICMS tax credits than they may use internally in offsetting their ICMS tax debts deriving from sales in the local Brazilian market.

As these credits are equivalent to cash, they would be entitled to assign and transfer their credit rights to other ICMS taxpayers. However, some State Governments raise obstacles to the use or to the assignment and transfer of such ICMS tax credits. One of such obstacles is the imposition of a time schedule for the use of the credits rather than accepting its immediate use.  

As Law Kandir is in a higher constitutional level as compared to an ordinary law, the State laws restricting the implementation of the tax credit use or transfer are not valid.

This is why Prado Garcia Advogados recommends its clients to seek the judicial remedies in order to overcome such illegal restrictions. Mere pleas to the State administration would be useless under such circumstances.