Brazil - Taxation and Location

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.

Get to know your play ground

Get to know your playground 

There are three major economic centers in Brazil, each has its own specialities and advantages, in this article you will find a briefe description of each of these centers and who can you find there.

São Paulo, the money state

São Paulo city, the capital of São Paulo state, is the largest city in South America with more than eleven Million residents. The commercial boom in São Paulo began on 1696 when coffee started to be planted in the area. In a few years, São Paulo became the major exporter of coffee in the world.
Nowadays São Paulo is the one that most contribute for the development of Brazil economy, concentrating more than 30% of the national GDP. São Paulo is also the economy hub of Brazil, especially when talking about business and technology.
In the last years, some of São Paulo industries are migrating to other areas in the countryside of São Paulo state, such as Campinas, Sorocaba and São Caetano in order to reduce taxes payment, yet there is a good transportation connection from all these areas to the capital.
Hosting the major business fairs of the country, a big number of offices and the major stock exchange, São Paulo considered a mandatory destination to any entrepreneur that wants to know what the Brazilian business is.

Rio de Janeiro, only leisure?

Differently from São Paulo, Rio de Janeiro, or just Rio, as natives use to call it, is important to the Brazilian scenario since the country's foundation. The city was the second country’s capital from 1763 until 1960 until the foundation of Brasilia.
Known as the wonderful city, Rio attracts more than three million tourists per year and in carnival period, the number of tourists outweighs the World Cup numbers. What enchants anyone that goes to Rio is the mix of urban life and beaches lifestyle.
For those who think that Rio is only a cultural and leisure destiny, the surprise happens when petroleum is mentioned. The biggest petroleum area of the country is in Rio de Janeiro, and companies as Petrobras are investing on studies to develop the area and qualify labors.
Rio de Janeiro is the second biggest city of the country, contributing for the economic development with the second Brazilian GDP. It is not difficult to find a foreigners that still takes Rio de Janeiro as the Brazilian capital.
Planned to host the coming world’s biggest sport events, world cup in 2014 and the Olympic Games in 2016, Rio is a target for major investments mainly in infrastructure and security.
latest news is that the plan for a bullet train connecting Rio to São Paulo was just approved, that will reduce the time to pass those 300 miles from 6-8 hours by bus to only 50 minutes

Brasília, the political city
Brasília is a different city from the major ones in Brazil. Planned by the architect Oscar Niemeyer and ordered by President Juscelino Kubitschek in order to be the new Brazilian Capital, the city was founded in 1960. More than sixty thousand workers constructed the city in only four years in order to comply with a determination of the Brazilian constitution.

Interesting fact : Brasilia is the largest city in the world that did not exist at the beginning of the 20th century.

Nowadays, all Brazilian government activity is concentrated in Brasília, situated at a special state names Distriro Federal (“federal district”), being reference for anyone who talks about politics or for those targeting their business to work with the government and it’s subsidiaries.

There are others yet smaller economic centers in Brazil we will discuss more about them in future articles. Next article will describe the connection between location and taxation. stay tuned ..

Where should I be in Brazil?

Where should I be in Brazil?  

Being the fifth country in the world both by population, economic influence and geographic area, the decision on where to locate your business in Brazil is very important. There are many factors in taking such decision, such as transportation, taxation, line of business, natural and human resource availability etc...
Following is a serie of 3 articles to explain in a nutshell some of these factors. 


(1) Get to know your playground - This first article gives general description of the major economic centers of Brazil

(2) Taxation and location - Brazilian taxation has its own specific characteristics and your location in Brazil can significantly impact the amount of tax you pay. The second article will describe the correlation between location and taxation and some of the governmental programs for reduced taxes in specific areas. 

(3) Who does what where? - Brazilian industries are spread around the county, but naturally there are some areas attracting specific industries. The third and last article of this serie, will map these areas, especially those concentrating in industries related to the ICT.