Overview of Tax System in Brazil
The Tax Act in Brazil are stipulated by the different hierarchy of laws. The hierarchy of laws from high to low is as follows.
Constitution; Ordinary Law; Complementary Law; Codes; Statutes; Provisional Measures; Decree; Decree Law; Delegated Laws; State Law; Municipal Law.
The procedure of tax processing and outlines of punishment are regulated by tax acts in details. In addition, president prescribes various regulations of tax temporarily and these temporary regulations will invalid if they are not legislated within 120 days.
Regarding various taxes, it is general to omit the IRPJ, IPI and name of tax. The followings are the abbreviations of various taxes.
IRPJ: Imposto de Renda Pessoa Juridica
IRPF: Imposto de Renda Pessoa Fisica
Value Added Tax:
- IPI: Imposto sobre product Industrializado
- ICMS: Imposto sobre Operacoes relatives a Circulacao de Mercadorias e Prestacao de Servicos
- ISS: Imposto sobre Servicos
COFINS: Contribuicao para o Financiamiento da Seguridade Social
II: Imposto de Importacao
IOF: Imposto sobre Operacoes Financeiras
ITCMD: Imposto sobre a Transmisscao Caussa Mortis e Doacao
IPVA: Imposto sobre a Propriedade de Veiculos Automotores
IPTU: Imposto sobre a Propiedade Predial e Territorial Urbana
ITBI Imposto sobre Transmissao de bens Inter Vivos
Classification of Tax items:
In general, items of tax in Brazil classify into Federation Tax and Council Tax in Brazil. Not only Tax Act, other acts in Brazil of formal name should be decided based on approval years and accumulated numbers of ordinations. In other words, whether a law can be passed or not is not decided by content of law, and decided by the approval numbers. Hence, the number of ordinations becomes more important.
Federation Tax and Council Tax
Most of the taxes, such as Income tax, VAT, Import Tax and Financial Tax, come under Federation Tax.
Conversely, Council Tax classify into state tax and city tax. For example, expect for the Federation Tax of ICMS, the VAT for the level of state also exists. Moreover, the VAT only for the city tax is also in existence.
Regarding the outlines and ways of application of Council Tax or City Tax, they are regulated by state or local government, which stipulates these laws.
Direct tax and Indirect tax:
Direct tax means the persons who impose an obligation of tax payment are the same with the actual payers. For example, the income tax, special purpose tax revenues and some other taxes come under direct tax.
Indirect tax means the persons who impose an obligation of tax payment are different from the actual payers. The persons do not pay the tax directly, but pay it through other persons who also impose an obligation of tax payment. For example, the VAT comes under the indirect tax.
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