On December 23, 2025, the State of Rio de Janeiro published State Law No. 11,071/2025 (the “Law”), amending Law No. 8,645/2019 that created the Temporary Budget Fund (FOT). The new law introduces significant changes; as a general rule, it increases the FOT rate from 10% to 20%, and indirectly reduces ICMS tax incentives and increases state revenue.
The Law redefines the conditions for the enjoyment of such incentives, setting out a progressive scale through 2032.
For non-onerous incentives, the FOT rate starts at 20% in 2026 and gradually increases until reaching 60% in 2032.
A fixed rate of 18.18% applies to incentives granted for a fixed term and conditioned to the fulfillment of onerous obligations, provided that the requirements of Federal Complementary Law No. 214/2025 are met.
The law also establishes a broad set of exceptions, excluding various regimes and sectors from this FOT increase. Companies covered by these rules will continue to be subject to the current 10% rate, including:
- Taxpayers benefiting from incentives established by State Laws No. 6,979/2015 (special regional tax treatment for industrial establishments) and No. 8,960/2020 (metal-mechanical sector);
- Article 4, I, of Decree No. 45,607/2016 (cigarettes, cigars, cigarillos, tobacco, and related products);
- State Law No. 10,335/2024 (cement, mortar, and non-refractory concrete production industry);
- State Decree No. 35,418/2004 (hygiene products, perfumes, and colognes);
- Companies in the wholesale sector benefiting from the Special Tax Regime provided by State Law No. 9,025/2020, regulated by State Decree No. 47,437/2020, regarding products purchased from industries located in Rio de Janeiro;
- Taxpayers benefiting from the incentive established by State Law No. 9,162/2020 (goods intended for education, research, and medical-hospital services);
- State Decree No. 44,629/2014: Establishments that process and/or manufacture products used in civil construction;
- State Decree No. 45,047/2014: The Special Tax Regime for industrial establishments that manufacture additives for lubricants and fuels; and
- State Decree No. 35,418/2004: The Special Tax Regime for companies that manufacture perfumes, eau de cologne, deodorants, talcum powder, cosmetics, and toiletries in the state.
The Executive Branch will further regulate the procedures for characterizing onerous incentives and the applicable adjustment timelines. The new rates will apply in the fiscal year following the law's publication, subject to a minimum 90-day period.
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