Brazilian Taxes

Impuestos Federales:

IR (PJ) – Corporate Income Tax
CSLL – Social Contribution on the Net Profit
IPI – Tax on Industrial Products
IOF – Tax on Financial Transactions
COFINS – Social Contribution to Finance the Social Security
PIS – Social Integration Program
PIS / CONFINS
II – IImport Tax

IRPJ (Impuesto sobre la Renta de Persona Jurídica)
 

Basis:

This tax is levied on capital gains and profit earned by Brazilian companies worldwide. In case of revenues not received under long-term contractr with government agencies, the corresponding tax may be deferred. In general, detuctible expenses are all the items related to the Company's usual business and required, to maintain its source of revenue.

   

Payment terms:

It must be paid on a monthly basis, latest on the last working day of the subsequent month.

   

Calculation: 

The calculation basis may be the actual results (as shown in the monthly or quarterly interim balance sheet) or the assumed results (calculated on a certain percentage of the gross revenue). The monthly tax on the actual or assumed profit must be offset in the annual income tax return as of the end of the fiscal year.

   

Rate:

La tasa básica del impuesto sobre la renta corporativo es del 15 % más una tasa adicional del 10 % para todas las entidades corporativas con renta tributable anual superior a R$ 240.000,00.

CSLL (Contribución Social sobre Beneficio Neto)

This tax was created to finance welfare and social programs, and it is in addition to the corporate income tax. The tax is levied on the book profit (excluding certain deductibles). The following additional adjustments are applied to the taxation basis:


IPI (Impuesto sobre Productos Industrializados)

With few exceptions, the Tax on Industrial Products (IPI) is levied on all the goods or products manufactured in or imported into Brazil.

Usually, this tax is levied on a basis according to the product characterization value as provided for in the regulations (tax scale).

The IPI Tax is charged to the buyer by the seller by adding it to the sales price. The sales invoice must show separately the IPI tax amount included in the invoice value.

Even service values must be included in the IPI/ICMS calculation basis, if such services are required to produce the industrial good or project. In this case, the Service Tax (ISS) is not applicable. However, if “start-up training” can be seen as a separate, independent service for the customer, than an invoice showing the ISS tax can be issued.


IOF (Impuesto de Operaciones Financieras)

This tax is payable in the case of certain domestic financial transactions. Banks and other financial institutions are responsible for collecting the tax in certain financial transactions, loans, insurance and foreign currency exchange contracts. This tax is levied at variable rates, depending on the maturity term and transaction type.

A recent change in legislation made the IOF tax applicable to loans between non-financial institutions.
 



COFINS (Contribución  Social para Financiación de la Seguridad Social)

The basis of this tax is the gross operating revenue; some deductions are allowed, such as cancelled sales and revenues from exports.

In the same way as in the case of IPI and ICMS, the COFINS may also be offset with tax paid on raw materials or component parts used in the finished products or consumed during the production process.



PIS (Programa de Integración Social)

This tax is paid to a fund to provide financial support to employees in case of unemployment, retirement or serious injury. The exclusions are the same as those applicable to the COFINS.


Similarly to IPI and ICMS, the PIS may also be offset with tax paid on raw materials or component parts used in the finished products or consumed during the production process. 


PIS / COFINS

The calculation of these two taxes is quite complex, as the taxation system may be cumulative or non-cumulative.

In addition to the two general calculation rules (non-cumulative and cumulative application), the PIS/Pasep Contribution and Cofins involve also several special calculation provisions depending on the type of revenue over which such contributions are levied.
 
The legislation stipulates the calculation system applicable to each company, but in some cases the company may choose a certain profit determination system for the sake of Corporate Income Tax calculation, which may for its turn change the PIS/COFINS calculation system.

The non-cumulative tax calculation system must be adopted by companies subject to the income tax on the basis of the actual quarterly or annual profit, and agriculture and consumption cooperatives.

 


Impuesto de Importación

This tax may be changed as a function of the Brazilian import policy and such changes are quite frequent. Therefore, the legislation currently in force must be checked at the time of import of any equipment. It’s based on the Brussels Nomenclature System.


State and Local Taxes

ICMS - Tax on Sales of Services and Goods
ISS - Service Tax
IRFF - Income Tax Withheld at Source



ICMS (Imposto sobre Circulação de Mercadorias)

This tax is levied on all the products (and some services) sold by a company. It must be indicated separately in the invoice and it is deemed as an integral part of the sales price.


In the same way as IPI, the ICMS tax may also be offset with tax paid on raw materials or component parts used in the finished products or consumed during the production process. The ICMS tax paid on permanent property or purchased goods for operating activities (capital goods) can be offset as well.


ISS (Impuesto sobre Servicios)

The tax calculation basis is the price of the service sold. These services must be independent from the equipment. If the services are required for the equipment and are an integral part of the goods sold, then they are subject to IPI and ICMS instead of ISS.

There is not offset of ISS tax paid to subcontractors, which makes ISS to represent 100% cost for the service customer. The customer may offset the ICMS (the IPI represents a cost for the equipment buyer) in the case of an equipment sale, which sometimes makes it interesting to add the services into the equipment package. However, this procedure represents a tax risk.


In some cases, the municipality accepts the amount paid to subcontractor to be excluded from the calculation basis, which must be checked on a case-by-case basis.


IRRF (Impuesto sobre la Renta Retenido en la Fuente)

Imported services and services under special invoice.
This tax must be calculated by the service buyer; the latter withholds the tax and pays it to the tax authority.

According to the current Brazilian legislation, the rate is 15% for imported services involving technology transfer, plus 10% CIDE (Contribution for Intervention in Economic Domain).

In the case of services without technology transfer, the rate is 25%. However, in the case of imported services, a judicial discussion may be proposed, with the possibility of reducing the rate to 15%
.

 



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