Interstate customs in Brazil
ICMS is the only tax levied on interstate operations in Brazil. In this article, we will detail the calculation of this tax on transactions between the Brazilian states.
Understanding the ICMS tax sometimes seems an impossible mission for entrepreneurs when even experts have a hard time on this task. No wonder there is several 500-pages books clarifying how this tricky tax works on its many variations and rates.
One of the most confusing aspects about ICMS is when the tax is levied on interstate operations. The transportation of goods of whatever nature from one state to another inside the Brazilian territory is subject to the ICMS tax, but only when these goods will still pass through some industrial transformation. For example, if a company located in São Paulo sells cotton fabrics to a clothing manufacturer located in the state of Pará, the operation will be taxed with the interstate ICMS.
The goods that are already ready to be sold to the final consumer are exempted from paying this tax. However, when the buyer is a re seller, the interstate ICMS will be levied.
Interstate sales of national products
Currently, there are two interstate rates for ICMS: 7% and 12%. These rates are applied differently in the states' inter-commercial relations. For example, the movement of goods from São Paulo to Minas Gerais, Paraná, Rio Grande do Sul e Rio de Janeiro is calculated at a rate of 12%. However, the movement of goods from São Paulo to the other states of Brazil is calculated at a rate of 7%.
Annually, the government releases a table, containing all the interstate rates that will be used during the year. You can check the 2012 interstate ICMS table in it interity here
There is a lot of buzz among the interested parties about changing the way ICMS is charged on interstate operations. We already wrote an article about it here.
Interstate sales of imported products
Since January 2013, the rate of ICMS on imported goods in interstate operations was unified at a rate of 4%. The measure seeks to end the so called “guerra dos portos” (war of the ports), in which states grant tax benefits to importers that enter the goods through their harbors, collecting more ICMS.
The measure will be applied to goods that were imported from abroad and after customs clearance:
- have not undergone the process of industrialization
- after passing through transformation process still result in goods with Content Import of more than 40%.
The provisions shall not be applied to:
- goods imported from abroad which are not produced in the national territory
- goods produced in accordance with the basic processes of dealing Decree-Law 288/1967, and the Laws 8.248/1991, 8.387/1991, 10.176/2001 and 11.484/2007
- transportation of imported natural gas to other states