Chaia e Carneiro: Electronic cigarettes, tax and criminal consequences

The extensive and successful campaigns to combat the use of tobacco in recent years in Brazil and the consequent reduction in the number of tobacco users have placed the tobacco industry in a difficult mercantile scenario: the commercialization of an absolutely stigmatized product for a large consumer market. party aware of the damages and dangers arising from its use.


The traditional cigarette, once sold as a symbol of beauty and youth, which at that time was even reinforced by advertising agencies, is today an old, outdated product, unable to effectively conquer and adhere to new generations. Therefore, the tobacco industry was left with the arduous task of separating its brands from the stigma deeply rooted through anti-smoking campaigns, which proved possible through updating their catalogs, aimed at a younger audience.

The result was a ruthless success: so-called “electronic cigarettes” or “vaporizers” resonated among young people. Unlike the pale cigarettes that are traditionally sold, e-cigarettes are accompanied by bright colors, a diverse palette of flavors, do not carry the usual bad smell of burning tobacco and, above all, are sold as a supposedly less harmful option compared to the well-known pack of cigarettes.

Although there is no doubt about the public’s attachment to these new products, one should think about the legal consequences, specifically criminal and tax, arising from the commercialization of electronic cigarettes in light of the Brazilian legal system.

The commercialization of electronic cigarettes, commonly referred to as “vaporizers,” as well as their accessories, has several important tax consequences for establishments engaged in this activity.

In this regard, since the activity of commercialization of these goods is still considered illegal in view of the retention of the ban announced by Anvisa in RDC no. 46/2009, companies that commercialize electronic cigarettes cannot harmonize their activities with what is prescribed by the tax legislation, oppose the law in order to enable business.

As an example: every company in Brazil has, among its tax obligations (main and additional/instrumental obligations), the mandatory issuance of an invoice, either for the entry of goods (purchase) or for the exit (sale), as well as must record the data contained in the transaction in the required tax documents, especially the description and classification of the goods sold.

In this case, many companies that sell electronic cigarettes and their accessories do not issue invoices or, when they do, insert false statements about the transaction, since the goods cannot be commercialized, and neither can the commercial business. even include in the tax documentation to avoid spreading the illegal activity to the inspection.

Then there is the possibility of maintaining the configuration of a possible criminal offense against a tax order, observing the types of criminal offenses provided for in Article 1, points III. and V. of Law 8.137/90, which define:

“Article 1. It is a criminal offense against the tax system to abolish or reduce the tax, or the social contribution and any assistant, by the following behavior:
III – falsify or modify an invoice, invoice, duplicate, bill of exchange or any other document related to a taxable transaction;
V – deny or fail to deliver, when it is mandatory, an invoice or an equivalent document, related to the sale of goods or the provision of a service, which has been effectively performed, or provide it in violation of the legislation.”

Although the practice of the aforementioned tax crimes seems unequivocal, one cannot forget the need it foresees caput effective suppression or reduction of taxes as a condition for practicing tax crime. In this sense, even if the entrepreneur or trader practices objective elements of the type (falsification/alteration of invoices or withholding/non-delivery of invoices), effective reduction or suppression of taxes to be collected must be proven, otherwise the principle of criminal law will remain violated.

But it is worth saying: the criminal consequences associated with the sale of electronic cigarettes are not limited to tax crimes. In addition to the latter, it is worth mentioning the possibility of qualifying the criminal offense of smuggling in an equivalent manner, provided for in Article 334-A, §1, point IV of the Criminal Code. at the verb:

“Article 334-A. Import or export of prohibited goods:
§1º The same penalty applies to those who:
IV – sells, exposes for sale, stores or, in any way, uses goods prohibited by Brazilian law for his own benefit or the benefit of others, in the performance of a commercial or industrial activity;
Paragraph 2 – For the purposes of this article, any form of illegal or clandestine trade in foreign goods, including that carried out in residences, is equivalent to commercial activities.”

Roughly speaking, the practice of the criminal offense of equated smuggling from Article 334-A, §1, point IV of the Criminal Code consists of the use of prohibited goods for one’s own or another’s benefit, in a commercial or industrial activity, equivalent to the latter, any form of illegal, clandestine trade that performed in a residential environment, in accordance with Article 334-A, §2 of the Criminal Code.

After banning the sale of electronic cigarettes using RDC no. 46/2009 edited by Anvisa, the empty criminal norm foreseen by the criminal type being analyzed (“prohibited goods”) will be fulfilled and, consequently, the insertion of this type of goods in the performance of a commercial or industrial activity in order to obtain a possible profit would lead to a clear configuration of the criminal acts of equal smuggling.

This discussion should not escape the actual tax effects, i.e. the taxes and fines that must be paid due to the non-payment (full or partial) of the business tax for those companies that do not issue the tax documents necessary for business operations or, even, for those that issue them in bad faith way.

At this point, even though it is about illegal goods, it should be remembered that the Tax Code has a principle monetary non olet, so taxation can reach tax legal facts even if it is considered illegal. It should not be confused here, and it is important to warn, with the material criterion of frequency, because it always focuses on a legal fact and respects the concept of tax prescribed in Article 3 of the National Tax Code.

Taxation in these cases arises, therefore, by subsuming the fact into the norm. That is, the fact of selling goods is subject to the rule of the ICMS incidence matrix, as well as the fact of making a profit is subject to the rule of the IRPJ incidence matrix. Note that the fact that creates wealth is illegal, but the unenforceable fact of selling goods and making a profit is completely legal.

On the other hand, if it is determined through possible supervision that the company’s income is greater than the presented tax documentation (disreputable), a misdemeanor warning can be drawn up in order to collect the missing amount of tax due and the imposition of a fine relevant to the specific case.

In this context, it is worth mentioning article 75-A, §1, subparagraph ‘c’, of Law 7,000/2001, of the State of Espírito Santo, which stipulates that in absences related to the collection of taxes (ICMS), in whole or in part, with the obligation to collect the missing amount , a penalty of 100% of the tax amount will also be paid.

Subsequently, paragraph 3 of the same legal provision, regarding obligations related to tax documentation, among different possible scenarios, can be drawn up in a tax assessment notice against the taxpayer: 1) a fine of 30% of the value of the transaction when he did not issue a tax document in accordance with legislation; 2) a fine of 50% of the effective value of the transaction when there is a different value from the transaction in the tax documents; 3) 50% fine of the value of the transaction if there is unauthorized alteration, lack or falsification of the tax document or insertion of false or incorrect elements into it.

There is, therefore, a complex of tax consequences for facilities that sell electronic cigarettes and the like, problems that start even from the formalization of the company, because as the subject of merchandising is prohibited, such facilities enter incorrect and false information regarding the activity performed during the formalization of a legal entity ( Cnae), the provision of false or inaccurate information from its formalization to its operation, which leads to a constellation of different illegal actions, either of a tax nature or even, in the last case, of a criminal nature.

Gabriel Vigneron Mello Chaia is a lawyer working in the state of Espírito Santo, with a post-graduate degree in Criminal Sciences at the Faculty of Law in Vitória.

Davi Araujo Portela Carneiro is a partner in Chaia & Carneiro Advogados and a graduate student in tax law at the Brazilian Institute of Tax Studies (Ibet).

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