By Vered Nets - CEO and Luiz Cezar Giacomazi - Financial and
Tax Consultant Brazil
A country’s tax regime is always a key factor for
any business considering moving into new markets. What is the corporate tax
rate? Are there any incentives for overseas businesses? Are there double tax
treaties in place? How will foreign source income be taxed?
Brazil is a
Federative Republic, and each of the 26 states and the Federal
District have their own legislation. This gives rise to 27 regulations on
indirect state taxes, meaning varying application, administration and
compliance rules in each state. Brazilian taxes are regulated in three levels: Federal,
State and Municipal. In this article illustrates the structure of tax payments
levied on corporates doing business in and with Brazil.
Most Important Taxes
charged on a Federal level
IRPJ corporate income tax
The tax consists
of a base tax of 15%, and additional surtax of 10% on annual income over R$
240,000.00. Tax is charged on worldwide income for residents of Brazil. Some
foreign tax relief and credits can be allowed under specific tax treaties.
CSLL Social Security
The contribution
is levied at a general rate of 9%.
For financial
institutions, private insurance companies and capitalization
companies, the
rate is 15%.
PIS social contribution tax
Social
Integration Program (PIS) tax; levied on gross income at a rate of 1.65%; the
tax is a non-cumulative tax for certain taxpayers; certain companies, including
local financial institutions and companies that manufacture goods in the Manaus
Free Trade Zone, are subject to the cumulative regime and make the contribution
at a 0.65% rate; the tax is also levied on imports of goods and services at a
rate of 1.65%
COFINS Contribution for Social Security Financing tax
Social security
financing contribution (COFINS); levied on gross income at a rate of 7.6%; the
tax is a non-cumulative (VAT-type) tax for certain taxpayers; certain companies,
including local financial institutions and companies that manufacture goods in
the Manaus Free Trade Zone, are subject to the cumulative regime and make the contribution
at a 3% rate; the tax is also levied on imports of goods and services at a rate
of 7.6%
IPI federal “production” tax.
Brazil does not
have VAT as such. Two types of value added type taxes exist in Brazil: State value
added sales and services tax (ICMS) and federal excise tax (IPI). This federal
tax is levied on industrialization of products when sold by industrializing
establishment. Its rate is around 20% depending on the product manufactured,
top rates applies to luxury or superfluous goods, such as alcoholic beverages
and cigarettes
CIDE Economic domain intervention contribution Tax
Levied on
payments to non-residents. Applies to royalty payments, technology transfers
and compensation of technology supply, and technical assistance. Rate at 10%.
IOF financial transaction tax
Foreign exchange
transaction levied at varying rates on loans and credit operations, certain
foreign exchange transactions, insurance and securities transactions. Rated between
0.36% to 6% depending on the type of the transaction.