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Tax (4)

 4.2.1 Several items of taxation

COFINS

PIS

IPI

ICMS

ISS

CIDE

 

     4.2.2 Amount of payment after tax or before tax

Brazil does not have VAT system similar to the European model, however ICMS and IPI are value added taxation.

 

4.3 COFINS

  4.3.1 Taxable companies

    4.3.2 Standard amount of tax payment

[The calculation basis for the Cofins contribution is the total gross revenue of a company during the month.][1]

 

    4.3.3 Tax-free

[The following activities are exempted from paying the Cofins and for that can be deducted from the calculation basis of the contribution:

 

·       Canceled and returned sales

·       Income from sale of fixed assets

·       Revenues generated from the sale of electricity by the Itaipu Hydroelectric Power Plant

·       Resources received as transfers, from the general budget of the Union, states, Federal District and municipalities to companies and public joint stock companies

·       Revenue related to the export of goods abroad

·       Revenue from services rendered to an individual or legal entity resident or domiciled abroad, whose payment represents inflow of foreign exchange

·       Income on the supply of goods or services for use or purchase of board ships and aircraft in international traffic, when the payment is made in convertible currency

·       Earned by Brazilian shipyards in construction activities, maintenance, modernization, conversion and repair of boats registered at the Special Brazilian Registry (REB)

·       The freight of goods transported by ship from Brazil to countries abroad registered in the REB

·       Revenue from the freight of transported goods between the country and abroad by ships registered in REB

·       Income from sales by the producer-seller to trading companies, provided to be exported abroad.][2]

 

    4.3.4 The method to decide the tax payment

4.3.4.1 The way of value-added tax

[1-Lucro Real

·       Commerce, Industry and Services: 7.6%

·       Non-cumulative regime: In this regime, the value of the contribution is calculated on the company’s monthly revenue, understood as the total revenues earned by the corporation minus some values configured as credits foreseen in the legislation.][3]

 

          4.3.4.2 The way of turnover tax

[2-Lucro Presumido

·       Commerce, Industry and Services: 3.0%

·       Cumulative regime: In this regime, there are no deductibility of credits. The value of the contribution is calculated directly on the calculation basis.][4]

 

          4.3.4.3 Special way

[3-Simples Nacional

·       Commerce and Industry: from 0.00% to 1.60%

·       Movable property lease: 0.00% to 2.42%

·       Services: from 1.28% to 2.63%][5]

 

    4.3.5 Deadline of Payment

4.3.6 Return

 

4.4 COFINS Import

    4.4.1 Taxable companies

[Law No. 10865/04 introduced the taxation of PIS and COFINS on imported products and services. This law determines that PIS and COFINS are due in the entry of foreign goods in Brazil and in the payment, crediting, delivery, the use or remittance of amounts to foreign residents or domiciled abroad as payment for the services supplied.

The taxpayers are all the importers and companies or people that contract the services of people or companies domiciled abroad.][6]

 

4.4.2      Calculation of standard amount of tax payment

        4.4.2.1 When goods are imported

Value for customs purposes adopted as the tax basis in the import tax, plus the State Sales tax (ICMS) and the PIS and COFINS amounts.

 

        4.4.2.1 When service are imported

In the import of services the tax basis is the price of the service plus Service tax (ISS) and the PIS and COFINS contributions.

 

    4.4.3 Tax rate

 Its rate is 7.6% for business income taxed by real (systematic non-cumulative)

 

  

4.5 PIS

    4.5.1 Taxable companies

[PIS (Programa de Integração Social) PIS has a very convoluted set of rules and sub-rules with specific treatment/rates for different industries and activities. Basically, PIS has two regimes: cumulative and non-cumulative. Companies that declare their corporate income tax based on estimated revenue/profits (usually small/medium companies) are mandated to apply the cumulative PIS regime (not subject to the input credit/output debit mechanism) with a rate of 0.65% of gross receipts. Those companies that declare their corporate income tax based on actual revenue/profits (usually medium and large companies) are mandated to apply the non-cumulative PIS regime (subject to the input credit/output debit mechanism) with a rate of 1.65% of gross receipts.][7]

 

    4.5.2 Standard amount of tax payment

·       [Simples Nacional:

  1. Commerce and Industry: from 0.00% to 0.38%
  2. Movable property lease and Services : 0.00% to 0.57%

·       Lucro Real: Commerce, Industry and Services: 1.65%

·       Lucro Presumido: Commerce, Industry and Services: 0.65%][8]

 

    4.5.3 Tax rate

A rate of 1% over the payroll of the employees.

 

        4.5.3.1 Companies and public corporation.

[The PIS/PASEP were established to promote the participation of the employees in the development of the companies. In practice, consists of a cash transfer program, aiming the better distribution of national income][9]

 

        4.5.3.2 Religion organization, Party, foundation

[For the following nonprofit institutions, the calculation basis for the PIS/PASEP contribution is the total monthly payroll of wages of their employees and not the entity's income.

 

·       Temples of any cult

·       Political parties

·       Some institutions of education and social assistance

·       Philanthropic, recreational and cultural institutions as well as some scientific associations

·       Unions, Federations and Confederations

·       Autonomous social services, created or authorized by law

·       Supervisory boards of regulated professions

·       Foundations of private law

·       Condominium homeowners or commercial

·       Organization of Brazilian Cooperatives (OCB) and the Cooperative State Organizations][10]

 

    4.5.3.3 Public corporation

Resources received as transfers, from the general budget of the Union, states, Federal District and municipalities to companies and public joint stock companies are not levied with this tax.

 

    4.5.4 Payment and period of payment

Every month.

 

    4.5.5 Return

[In some situations, the amount of credits assessed may surpass the amount of debts. It may happen for example in export transactions. In such case (of export transactions), the taxpayer may either maintain the credits in its records and use them to offset future PIS and COFINS debts or request the government to reimburse or authorize the offsetting of such amounts against other federal taxes managed by RFB, such as IRPJ, CSLL or IPI, according to the conditions established by the specific legislation.][11]

 

  4.6 IPI

    4.6.1 Taxable business

        4.6.1.1 Taxable goods and points of tax payment

[IPI is levied whenever one of the following events happens:

-Customs clearance of imported industrialized goods, after import duties are paid.

-Industrialized goods leaving an industrial facility.

-Abandoned or seized goods acquired in an auction.][12]

 

        4.6.1.2 Definition of manufacturing facility

[Industrialized goods are the result of any operation considered as an industrialization, even if it was incomplete, partial or intermediate. The industrialization is any operation which modifies the nature, operation, finishing, presentation and finality of a product, or which perfects the product for consumption. There are five different types of industrialization:

-Transformation: carried over inputs or intermediate goods

Processing: modifies, perfects or alters the operation, utilization, finishing or presentation of the goods

-Assembly: consists in assembling goods or parts of them, resulting in a new product, even if it is still under the same tax classification

-Conditioning or Reconditioning: alters the presentation of the product, by packing it, even when replacing the original packaging. Not valid when the packaging is destined only to transport the product

-Renovation or Reconditioning: carried over used goods or remaining parts of deteriorated goods.][13]

 

 

        4.6.1.3 Tax free

[Export Companies with 70% of its revenue from exportation are eligible for tax exemptions for IPI, PIS and COFINS on the importation of raw materials, intermediate products, and packing material. Certain commodity producers are also exempt from taxes such as ICMS, PIS and COFINS. For example soy producers selling soybean commodity are exempt from these taxes when the commodity is exported.][14]

 

    4.6.2 Taxable companies

IPI taxpayers are all those that acquired goods through one of the events mentioned above, being them:

-Importer

-Industrialist

-Merchant

-Winner of a customs auction

 

    4.6.3 Calculation of amount of tax payment

·       IPI:
(CIF * (1 + II (Import Duties)))

 

        4.6.4.1 Purchase tax credit

The IPI tax is calculated based on:

·       For Brazilian goods: 
Sales price

·       For Imported goods: 
Sales price + Shipping Cost + Import Duty

 

    4.6.5 Tax rate of IPI

The IPI tax rate varies depending on the product classification.

 

    4.6.6 Payment

The importer or manufacturer must pay IPI if the product so requires.

 

  4.7 ICMS

    4.7.1 Taxable business

        4.7.1.1 Tax free

The ICMS is not imposed on the export of products or services.

 

    4.7.2 Taxable companies

[Is imposed on transactions involving the sales and other commercial operations with goods (including electricity), the rendering of any type of inter municipal or interstate transport services and on communication services.][15]

    4.7.3 Standard amount of tax payment

        4.7.3.1 Standard amount of tax payment of domestic business

[For domestic transactions and services carried out within the same Brazilian State, the respective tax rates will be determined by each State.][16]

 

        4.7.3.2 Standard amount of tax payment of import

[The rate established for intrastate transactions is also applicable to the sale of products to non-taxpayers, even if they are located in a state different from the one of the seller.][17]

 

        4.7.3.3 Movement of goods between facilities of one company

[The taxable basis of the ICMS due on the sale of products is, as a rule, the value of the transaction, added by insurance, conditional discounts and freight, if charged separately and rendered by the seller or on its behalf, always calculated on a gross-up basis. In the rendering of interstate and inter municipal transportation and communication services, the ICMS is usually imposed on the price of the service.][18]

 

    4.7.4 Tax of business crosses Provinces

[ICMS has two different aliquots: 12% for the less developed states and 7% for the more developed ones.

Currently, when the good is transferred from one state to another, the producer state gets 7% or 12% of the value of the product and the consumer state gets the rest of the amount that completes the rate. So, for instance, if a good is charged in 18% in the state of destination, and the producer state gets 7% or 12%, the consumer state will get 11% or 6% of it.][19]

 

    4.7.5 Tax rate

        4.7.5.1 Tax rate of sales inside one province

The general tax rate applicable to domestic transactions may be up to 19%, depending on the State where the transaction takes place.

 

        4.7.5.2 Tax rate of sales crosses Provinces

On interstate transactions carried out between taxpayers, the rate is established by the Federal Senate and may be 4%, 7% or 12%

 

        4.7.5.3 Tax rate on particular goods

[The base value for the calculation of ICMS depends on the usage of the goods. If a customer buys goods for production or reselling, ICMS is calculated on the goods value without IPI. If the goods are used in a different way (e.g. consumption), ICMS is calculated on the goods value plus IPI.

Additionally, the usage determines how the amounts are posted in purchasing. If a material is used for production or reselling, the tax amounts are posted to separate line items. If a material is used for consumption, the tax increases the value of the material and cannot be recovered.][20]

 

    4.7.6 Substitution of tax payment

[The transaction of ST involves two types of taxpayers:

• Substitute taxpayer(Contribuinte Substituto): He is responsible for the retention and payment of the tax. Usually it is the manufacturer or importer responsible to the subsequent operations.

• Substituted taxpayer (Contribuinte Substituído): He has the tax due on the operations and services paid by the substitute taxpayer.

 

There are three types of Tax Substitution, as follows:

1) Antecedent Tax Substitution (Substituição tributária antecedente): where the law chooses the time and responsible for collecting the tax from taxpayers involved in the previous steps, the purchaser or recipient of the product, as is the case of deferral, which has set the close of the command and the taxpayer responsible for gathering exaction. The ST in relation to subsequent operations is characterized by the assignment of a particular taxpayer (usually the first in the marketing chain, the manufacturer or importer) to pay the value of ICMS due in subsequent operations with the goods until his departure meant the consumer or end user.

 

2) Concomitant Tax Substitution (Substituição tributária concomitante): determines the need for the instant payment as the triggering event occurs. This kind of substitution regime is characterized by the allocation of liability for payment of tax to another taxpayer, and not one who is performing the operation or provision of service, concomitantly with the occurrence of a triggering event. This species is the Tax Substitution of cargo transportation services.

 

3) Subsequent Tax Substitution (Substituição tributária subsequente): futures tied to events (also called tax replacement forward), applying to cases relating to our regulation (beer, mineral water, cigarettes, ice cream, new vehicles, tires, cement, etc.). Fixing margins profit and those responsible for this obligation. This is the best known type.][21]

 

4.8 ISS

4.8.1 Taxable items

         4.8.1. Tax free

[Examples of services that are immune from paying ISS are:

·       Services provided by the government or by governmental entities

·       Services provided by political parties and labor unions

·       Books, newspapers, magazines and similars][22]

 

     4.8.2 Taxable companies

[ISS collection is the provision of various services, listed by the federal government. There are almost 200 services on this list, relating to:

·       Medical assistance and health

·       Technology

·       Education

·       Transportation

·       Leisure and entertainment

This tax is also applied to services provided by foreign companies in Brazil, even if the service itself was initially provided abroad and finished in Brazil.][23]

 

     4.8.3 Calculation of amount of tax payment

         4.8.3.1 Standard amount of tax payment

[The tax will be charged based on the location where the company responsible for providing the services is established. This means that if a corporation established in the city of São Paulo is providing services for a company in the city of Santos, for example, the charged ISS rate will be the one from São Paulo.

 

There are a few exceptions to this rule. If the service provider does not have a facility - commonly seen with freelancers, for example - the tax will be charged from the provider’s residence.][24]

 

         4.8.3.2 Tax rate

[The maximum ISS rate set is 5%, and the minimum rate is 2%. These rates are charged on the price of the services being provided][25]

 

 

     4.8.4 Payment

         4.8.4.1 Payment period

[It has to be paid monthly:

·       by freelancers, by the last day of the month when the service was provided.

·       by legal entities, by the 10th day of the subsequent month of the service provision.][26]

 

         4.8.4.2 Place of payment

[The general rule is that the tax is due to the municipality where is located the headquarters of the service provider.][27]

 

         4.8.4.3 Construction service

[There are some exceptions, like on the case of contractors or demolitions, when the tax is due on the place where the service is provided.][28]

 

 

4.9 CIDE

     4.9.1 Burden charge for promotion of domestic technology development

         4.9.1.1 Taxable companies

  • [CIDE  Remittances to Abroad (CIDE - Remessas para o Exterior/CIDE - Royalties or CIDE - Remittances to Abroad)

Taxpayers: Holders of use or exploitation licenses and signatories of technology transference agreements.

 

  • FUST and Funttel (CIDE  FUST and Funttel)

Taxpayers: Companies that are Service Providers of telecommunication services in Brazil.

 

         4.9.1.2 Standard of tax payment

         4.9.1.3 Tax rate

 

1.     Remittances to Abroad (CIDE - Remessas para o Exterior/CIDE - Royalties or CIDE - Remittances to Abroad)

·       10%

 

2.     FUST and Funttel (CIDE  FUST and Funttel)

·       1.0% for FUST

·       0.5% for Funttel][29]

 

 

    4.9.2 Burden charge for import and trades of oil and gas and derived production

         4.9.2.1 Taxable companies

  • [CIDE - Fuels (CIDE - Combustíveis or CIDE - Fuels)

Taxpayers: Fuel Producers and/or Importers.][30]

 

 

 

 

 

         4.9.2.2 Taxable item

Importation and Commercialization of oil, natural gas and others fuels in the internal market.

 

  1. Amount of tax
  2. [Fuels (CIDE - Combustíveis or CIDE - Fuels)

Has an specific rate, a amount of BRL by m³ or by ton.

·       Gasoline: 860.00 BRL per m³.

·       Diesel: 390.00 BRL per m³.

·       Kerosene (aviation fuel): 92.10 BRL per m³.

·       Fuel oils: 40.90 per t.

·       Liquefied petroleum gas (LPG), including the one derived from natural gas and naphtha: 250.00 BRL per t.

·       Ethanol fuel: 37.20 per m³.][31]