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GLOBAL INDIRECT TAX

Brazil
Country VAT/GST Essentials kpmg.com

TAX

a Swiss entity. KPMG International provides no client services. Member firms of the KPMG network of independent firms are affiliated with KPMG International. .b | Brazil: Country VAT/GST Essentials © 2012 KPMG International Cooperative (“KPMG International”). All rights reserved.

zero rates. All rights reserved. a Swiss entity. KPMG International provides no client services. or exemptions? Registration Who is required to register for Brazilian VAT? Are there penalties for not registering or late registration? Are there any simplifications that could avoid the need for an overseas company to register for VAT? VAT Grouping Is VAT grouping possible? Can an overseas company be included in a VAT group? Returns How frequently are VAT returns submitted? Are there any other returns that need to be submitted? VAT Recovery Can I recover VAT if I am not registered? Does your country apply reciprocity rules for reclaims submitted by non-established businesses? Are there any items that you cannot recover VAT on? International Supplies of Goods and Services How are exports of goods and services treated? How are goods dealt with on importation? How are services which are brought in from abroad treated for VAT purposes? All information reflected in this document was obtained/summarized from KPMG in Brazil as of October 2011. . © 2012 KPMG International Cooperative (“KPMG International”).Brazil: Contents Scope and Rates What supplies are liable to VAT? Country VAT/GST Essentials 2 2 2 3 4 4 4 4 5 5 5 5 5 5 6 6 6 6 7 7 7 7 Invoices What do I have to show on a tax invoice? Can I issue invoices electronically? Is it possible to operate self-billing? Transfers of Business Is there a relief from VAT for the sale of a business as a going concern? Options to Tax Are there any options to tax transactions? Head Office and Branch Transactions How are transactions between head office and branch treated? Bad Debt Am I able to claim relief for bad debts? Anti-Avoidance Is there a general anti-avoidance provision under VAT law? Penalty Regime What is the penalty and interest regime like? 7 7 10 10 11 11 11 11 11 11 12 12 12 12 13 13 What is the standard rate of VAT? Are there any reduced rates. Member firms of the KPMG network of independent firms are affiliated with KPMG International.

IPI The tax is normally charged on an ad valorem rate according to the classification of the product based upon the international Harmonized Commodity Description and Coding System (HS). The COFINS is charged on gross receipts from supply of goods and services. © 2012 KPMG International Cooperative (“KPMG International”). although there are lower rates for specific services. PIS and COFINS The standard rates of PIS and COFINS are 1. the rate applied may vary based on the state of destination.2 | Brazil: Country VAT/GST Essentials Scope and Rates What supplies are liable to VAT? There are two value-added taxes in Brazil. The COFINS is described as a social contribution and is targeted for funding of social welfare programs. Credit is given with respect to the IPI tax paid on the raw materials or component parts used in the finished product or consumed in production. What is the standard rate of VAT? The standard rates of VAT are: ICMS The standard rate of ICMS is 17 percent. Luxury goods are at the high end of the tax scale. Services subject to the ISS are defined by federal law. One is a state sales tax (Imposto sobre Circulação de Mercadorias e Serviços [ICMS]) and the other is a federal excise tax (Imposto sobre Produtos industrializados [IPI]). communications and electricity. a Swiss entity. or sold through exclusive distributors. rates may vary from one municipality to another. sold at a higher price by the producer or manufacturer through a branch. Social Contribution on Billing (Contribuição para o Financiamento da Seguridade Social [COFINS]) and Contribution to the Social Integration Programme (Programa de Integração Social [PIS]). . there are other taxes that are due on supply of goods or services: services tax (Imposto Sobre Serviços [ISS]).65 percent and 7 percent. ISS The standard rate of ISS is 5 percent. repackaged for sale at a higher price. All rights reserved. The COFINS is charged on gross receipts from supply of goods and services. The tax is paid upon import or on the manufacture of a product. administered by the World Customs Organization in Brussels. Rates range from zero to a maximum of 330 percent and average about 10 percent. a joint venture. with a few exceptions.6 Furthermore. respectively. . However. Each municipality (city) must have its own list of taxed services. ICMS is due on the physical movement of merchandise. or through an affiliated concern. Member firms of the KPMG network of independent firms are affiliated with KPMG International. The PIS was created to fund the unemployment insurance program. However. IPI excise tax is due. KPMG International provides no client services. The difference in IPI must also be paid if the goods or products are: • • • • imported and sold at a higher price by the importer to a domestic purchaser. The ICMS is also levied on inter-state and inter-municipal transport services. on all goods imported or manufactured in Brazil. On inter-state movements of goods. ISS is a municipal tax on gross billings for services. Minas Gerais and Paraná the standard rate is 18 percent and Rio de Janeiro is 19 percent. in São Paulo.

periodicals. All rights reserved. and the paper consumed in the printing of such products sale of fixed assets fruits. which includes: • • • • • • free samples. • • • • • There is a list of exemptions. with no commercial value vessels. including: • • • • • exporting books. fuel and minerals belonging to the country gold. including: • farm implements and tractors. • © 2012 KPMG International Cooperative (“KPMG International”). a Swiss entity. directors and members of the advisory or fiscal boards of partnerships and foundations. except sporting or pleasure boats exports books.Brazil: Country VAT/GST Essentials | 3 Are there any reduced rates. ISS – Tax on Services The following services are exempt from ISS: • • service exports services rendered through an employment relationship. . freelances. periodicals. IPI – Tax on Industrialized Products There is an extensive list of products which are tax exempt or on which the tax rate is zero. and farm/garden produce preservatives. the capital. which have been granted some incentives diesel oil and hydrated ethyl alcohol fuel motor vehicles sand and stones food products transport services. when seen as a liquid asset. newspapers. KPMG International provides no client services. petroleum products. machines. as well as managing partners and delegate managers amounts intermediated in the bonds and securities market. There is a lower. 7 percent ICMS rate levied on some specific goods and services. zero rates. There is an extensive list of exemptions. including: • • products that are part of the basic food basket products from the electronic data processing industry. industrial devices and equipment and products from the electronic data processing industry. the amount of bank deposits. newspapers. Member firms of the KPMG network of independent firms are affiliated with KPMG International. interests and default interests regarding credit operations performed by financial institutions. 12 percent ICMS rate levied on some specific goods and services. including: • • • • • • live animals and animal products plant products animal and plant fat or oil chemical products textile products shoes. or exemptions? Yes. ICMS – Tax on the circulation of goods and transportation and communication services There is a lower. and paper consumed in the printing of such products electric energy. vegetables.

There is no threshold below which a business is not required to account for these taxes. or COFINS in Brazil. including: • • • telecommunication services passenger transportation services by road. • • There is a list of exemptions which includes: • • • • exportation of goods exportation of services with payment in convertible currency sales of products to a commercial export company for export purpose specifically sales of fixed assets. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Non-Brazilian Entities Foreign businesses are able to register for IPI. a Swiss entity. PIS. registration is compulsory. KPMG International provides no client services. ICMS. ISS. This will most likely give rise to corporate income and other local tax liabilities in Brazil.04 per month of operation. Who is required to register for Brazilian VAT? Brazilian Entities If a business makes supplies of goods and services that are subject to IPI. underground. The penalty may vary from one municipality to another. secondary. . All rights reserved. assuming that they have established a permanent business in the country.4 | Brazil: Country VAT/GST Essentials Registration PIS (Social Integration Tax) and COFINS (Social Contribution Tax) There is a lower rate of 0. ISS. ISS The penalty for failure to register for the ISS is BRL750 in São Paulo city. PIS. ICMS. provided the operation has been performed in a legal manner and the tax duly withheld is BRL119. Businesses are required to separately register for ICMS in each state and ISS in each city where it has any kind of establishment. without prejudice to all other applicable penalties. © 2012 KPMG International Cooperative (“KPMG International”). elementary.65 percent for PIS and 3 percent for COFINS ICMS for specific goods and services. and COFINS only if they have a permanent establishment in Brazil and they perform taxable transactions in the country. and college education sale of used cars. railway or water air passenger transportation services rendered by companies licensed to operate on domestic flights and those resulting from the rendering of air passenger transportation services by air taxi companies services related to early childhood. Are there any simplifications that could avoid the need for an overseas company to register for VAT? Foreign companies that operate in Brazil are subject to the same legal requirements that the domestic companies are. Are there penalties for not registering or late registration? ICMS The penalty for failure to register a fiscal document.

Brazil: Country VAT/GST Essentials | 5 VAT Grouping Is VAT grouping possible? VAT grouping is possible only for the purposes of calculating and withholding contributions for PIS/COFINS. Each establishment (belonging to the same company) must calculate and withhold the above-mentioned taxes – consolidated calculations are not allowed. IPI. Some States of Brazil allow establishments located in the same State and under the same corporate entity. . and ISS. Returns How frequently are VAT returns submitted? For each tax there is a specific requirement. Member firms of the KPMG network of independent firms are affiliated with KPMG International. to centralize the calculation of ICMS. a Swiss entity. entities belonging to the same economic group but with distinct corporate identities are not allowed to calculate their taxes jointly. the tax authorities of the receiving state require that the sender of such goods or the services rendered send. Regarding ICMS. on a monthly basis. have their filing more closely scrutinized by the tax authorities. electronic files containing information regarding the operations performed with that state. A selection of some specific industries. • • • ICMS: (GIA) Information and Calculation form – monthly ISS: Declaração Eletrônica de Serviços (DES) Electronic Statement of Services – monthly IPI/PIS/COFINS: Declaração de Débitos e Créditos Tributários Federais (DCTF) Federal contributions and taxes statement – monthly PIS/COFINS: Demonstrativo de Apuração das Contribuições Sociais (DACON) Demonstrative of Calculation os Social Contributions – monthly • Are there any other returns that need to be submitted? Whenever interstate operations involving goods and services take place. All rights reserved. set forth by the applicable legislation. © 2012 KPMG International Cooperative (“KPMG International”). it is not possible to have VAT grouping in cases of distinct companies or corporate entities. KPMG International provides no client services. Can an overseas company be included in a VAT group? In Brazil.

PIS/COFINS: • In general.6 | Brazil: Country VAT/GST Essentials VAT Recovery Can I recover VAT if I am not registered? No. KPMG International provides no client services. © 2012 KPMG International Cooperative (“KPMG International”). generates a right to a credit. services or products do not generate a right to a credit at the time of their inflow if their outflow was tax exempt. . This rule does not apply to ISS. it is possible to say that goods. All rights reserved. • • IPI: As a general rule. or in service rendering that is subject to tax. they allow the offset of what is owed from each operation or installment with what has been previously levied. accompanied by the appropriate fiscal document. issued by a taxpayer in good standing before the tax authorities. the inflow of raw materials that are intended for the industrial process. Therefore. a Swiss entity. in regards to the inflow of goods or services. once they are non-cumulative taxes. Member firms of the KPMG network of independent firms are affiliated with KPMG International. They originate a right to credit. Only those taxpayers who duly fulfill the conditions established by the law can benefit from tax credits. the inflow of goods or services intended for the industrialization and goods for resale generates a right to a credit. the legislation establishes exceptions to the following taxes: ICMS: When the goods or services coming in are: • • unrelated to the company business for integration in a product or use in a process of industrialization or rural production of a product where outflow is not taxed or is tax exempt for commercialization or service rendering.understood as goods that are not for commercialization or that are not used as part of a product or for consumption in its respective process of industrialization or rural production. However. Does your country apply reciprocity rules for reclaims submitted by non-established businesses? N/A Are there any items that you cannot recover VAT on? As general rule. when the outflow or the service that follows is not taxed or is tax exempt for use or consumption of the company itself .

import operations are subject to the following taxes: II (import duty). shipping (for the purpose of demonstration. ISS on importation of services was established when the Complementary Law 116/03 came into effect and. There is no credit of ISS. . PIS/COFINS.Brazil: Country VAT/GST Essentials | 7 International Supplies of Goods and Services How are exports of goods and services treated? Goods The Brazilian Federal Constitution establishes that goods intended for export have tax immunity. or other) the CFOP code Fiscal Code on Operations and Transactions the state registration number the denomination invoice the kind of operation – inflow or outflow the serial number of the Invoice and. all other taxes are noncumulative. ISS. Services The Brazilian Federal Constitution establishes that services intended for export have tax immunity. soon after that. PIS and COFINS also started to be levied on the importation of services. the expression Series. industrialization. Invoices What do I have to show on a tax invoice? If you have to issue a tax invoice it should contain the following data: In the “Issuing” box • the name or corporate name • • • • • • • the address the city the state or territory the telephone and fax numbers and/or e-mail the zip code the corporate Taxpayer Registry enrollment number with the Ministry of Finance the kind of operation resulting from the inflow. ICMS. The contributions for PIS and COFINS levied on the importation of services can be recovered.00 the day of issuance of the Invoice the day in which the good effectively left the company the time in which the good effectively left the company. a Swiss entity. The right to tax credits follows the same rules applied on the acquisition of assets carried out within the country and. they do not generate a right to a credit. considering that such tax is cumulative. upon the publication of the Ordinary Law 10. immediately below it.00. Member firms of the KPMG network of independent firms are affiliated with KPMG International. goods for production or resale generate a credit right derived from those taxes. provided the service imported is applied directly on industrial processes. Except for the import duty and ISS. How are services which are brought in from abroad treated for VAT purposes? On importing of services. All rights reserved. such as: sale. followed by the corresponding number the number and destination of each copy of the Invoice in the field provided for indicating the deadline for the issuance of the Invoice. transfer. when applicable. How are goods dealt with on importation? As a rule. In fact. • • • • • • • • • • © 2012 KPMG International Cooperative (“KPMG International”). This taxation is relatively recent. IPI. KPMG International provides no client services. return. that is. 00. as a rule. PIS and COFINS are paid.865/04.

kind. KPMG International provides no client services. the total value of the products the freight cost the insurance cost the cost of other additional expenses the total amount of IPI. All rights reserved. Member firms of the KPMG network of independent firms are affiliated with KPMG International. • • • • • • • • © 2012 KPMG International Cooperative (“KPMG International”). when applicable. whenever required by the legislation regarding IPI – Tax on Industrialized Products the Código de Situação Tributária – CST Code of the Tax Status the unit of measurement used for quantifying the products the amount of products the unit cost of the products the total value of the products the ICMS rate the IPI rate. brand. In the box “Tax Calculation” • the tax basis for calculation of ICMS • • • • • • • • • the amount of ICMS levied on the operation the tax calculation basis used on assessing the amount of ICMS withheld for tax withholding. .8 | Brazil: Country VAT/GST Essentials In the box “Receiver/Sender” • the name or corporate name • the Corporate Taxpayer Registry enrolment number or the Individual Taxpayer Registry enrolment number with the Finance Ministry the address the zip code the city the telephone and fax numbers and/or e-mail the state or territory the state registration number. quality. a Swiss entity. when adopted by the sender: the information established by the applicable legislation. In the box “Information of the Product” • the code adopted by the establishment for product identification purposes • the description of the products. the amount of ICMS withheld for tax withholding. • • • • • • In the box Fatura. series. model. including: name. type. and other information that allow for their perfect identification the fiscal classification of the products. when applicable the total value of the invoice.

in case of an Invoice issued through electronic data processing. Member firms of the KPMG network of independent firms are affiliated with KPMG International. the code of the tax department to which it is related with clear indication of the expression Código do Posto Fiscal Tax Service Office the control number of the form. address. All rights reserved. a Swiss entity. • • • • • • • • • • • • • In the footnote or on the right side of the Invoice. there should be: • • • • • the acknowledgment that the products have been delivered date in which the products were delivered identification and signature of the receiver of the products the denomination Invoice serial number of the Invoice. and in case of a establishment located in the city of São Paulo. and Corporate Taxpayer Registry enrollment numbers with the Finance Ministry of the printer of the fiscal document. seller. the serial number of the first and last document printed and their respective series. • in the field For the Tax Authorities leave it blank. © 2012 KPMG International Cooperative (“KPMG International”). the name. state registration. or other indicative information. KPMG International provides no client services. when applicable the number of volumes transported the kind of volumes transported the brand of the volumes transported the numerical sequence of the volumes transported the gross weight of the volumes transported the net weight of the volumes transported. • • the freight payment condition – if at the sender’s or receiver’s expenses the vehicle license plate number in case of road transportation. advertising. In the box “Additional Information” • in the field Additional Information – other information that matters to the sender. in case of other means of transportation the state or territory in which the vehicle is registered the carrier’s Corporate Taxpayer Registry enrollment number or the Individual Taxpayer Registry enrolment number with the Finance Ministry the address of the carrier the City of carrier the state or territory in which the carrier is domiciled the state registration number of the carrier. when applicable. the date and amount of documents printed. that shall be part of the original Invoice as a detachable slip. etc. issuer of the Invoice. .Brazil: Country VAT/GST Essentials | 9 In the box “Carrier/Volumes Transported” • the name or corporate name of the carrier or the expression “Self-employed” when applicable . place of delivery – when different from the receiver’s address – in accordance with what is established in the applicable legislation. In the product delivery receipt. and the number of its authorization for printing fiscal documents. such as: number of the order.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. a Swiss entity. promoted by Public Authorities. under the terms established by the state tax authorities. • • • • • • © 2012 KPMG International Cooperative (“KPMG International”).10 | Brazil: Country VAT/GST Essentials Can I issue invoices electronically? The invoices may be issued through electronic data processing. . exporter and/or importer) should submit. self billing is not allowed. in digital files. sent for whatever reason by a producer or individual or company not required to issue fiscal documents in return. However. All rights reserved. when undelivered to receiver imported directly from abroad successfully bided for or bought in auction or biddings. in a real or symbolic sense: • new or used. to which it had been sent exclusively for the purpose of public exhibition in return of shipment for sale outside the establishment in return. Is it possible to operate self-billing? As a rule. established in the legislation. when sent by a self-employed or freelance professional to which such product had been sent for manufacturing purposes in return from exposition or fair. KPMG International provides no client services. even having their issuance done by electronic data processing. can self-billing be performed at the moment the good or service effectively enters the establishment. Only under specific conditions. the invoices must be printed and be sent in hard copy together with the merchandise. under the terms and conditions established by the state tax authorities. The ICMS taxpayers (registered as a commercial or industrial company. information regarding the operations and service rendering carried out.

ISS is not levied. for this kind of operation. the legislation allows the suspension of payment of the IPI. it is a requirement for this benefit. PIS and COFINS are not levied. once the trigger factor is the circulation of goods. as there is no billing of services between headquarters and branch. a Swiss entity. However. as there is no revenue coming from the sale of assets or services resulting from this operation. Head Office and Branch Transactions How are transactions between head office and branch treated? ICMS is levied on operations involving asset transferring from headquarters to branches.Brazil: Country VAT/GST Essentials | 11 Transfers of Business Is there a relief from VAT for the sale of a business as a going concern? Yes. If you sell your business while it is in operation. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. Options to Tax Are there any options to tax transactions? No. . Therefore. then VAT cannot be levied. However. without any moving of such assets. otherwise taxes shall be levied. All rights reserved. that the company is sold with all its assets and inventory. IPI is levied in case the good is industrialized. © 2012 KPMG International Cooperative (“KPMG International”). considering that the triggering event for this tax is the rendering of remunerated services. there is no triggering event for these taxes.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. Even if the company is not able to recover all its debts related to the sale of goods or services. the possibility of subjective interpretation of judicial acts. © 2012 KPMG International Cooperative (“KPMG International”). has added a single paragraph to article 116 of the Brazilian Tax Code (CTN). for tax purposes. KPMG International provides no client services. . a Swiss entity. introducing. a perfectly legal act could be considered nil. Anti-Avoidance Is there a general anti-avoidance provision under VAT law? Yes. A tax is levied on the performance of the operation. The Complementary Law 104 dated 10 January 2001. What it is argued is if a specific operation could be generating a lower taxation. the legislation does not provide any benefits related to unrecoverable debts. independently from the achievement of financial return. All rights reserved. and therefore.12 | Brazil: Country VAT/GST Essentials Bad Debt Am I able to claim relief for bad debts? Under the Brazilian legislation there is no relation between payment resulting from a commercial transaction and payment of taxes. The above-mentioned concept addresses the disregard to judicial acts when performed with the purpose of concealing the occurrence of a tax-triggering event. Consequently compliance to the law is not enough. by the tax authorities.

Brazil: Country VAT/GST Essentials | 13 Penalty Regime What is the penalty and interest regime like? There are several ways of penalizing companies who have failed to fulfill their obligations. All rights reserved. for each failure of meeting an obligation there is a specific penalty. KPMG International provides no client services. either main or ancillary obligations. The penalties established by law range from BRL 20 to 150 percent of the total value of the operations that have failed to be taxed. Member firms of the KPMG network of independent firms are affiliated with KPMG International. © 2012 KPMG International Cooperative (“KPMG International”). in case of non payment of taxes. Accessory obligations are those that result from the main one and whose non-fulfillment does not affect the latter. a Swiss entity. In this sense. with the addition of monthly default interests charged on the amount of the debt. .

KPMG International provides no client services. The KPMG name. a Swiss entity. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties.kpmg. Publication name: Brazil – Country VAT/GST Essentials Publication number: 111202 Publication date: January 2012 . © 2012 KPMG International Cooperative (“KPMG International”). nor does KPMG International have any such authority to obligate or bind any member firm. there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.www. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. All rights reserved. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Designed by Evalueserve. logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information.