10/11/11 - 12h33

Understanding ICMS

ICMS is one of the most common taxes in Brazil and applies to the commercialization of goods and services. In this particular article, we will give a detailed approach to this tax, focusing on what does it apply to.

What is ICMS?

ICMS is the abbreviation for Imposto Sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual de Intermunicipal e de Comunicações. It is a value-added tax on sales and services and applies to the movement of goods, transportation and communication services, and to the supplying of any goods.

Overall, it is paid by private people and legal entities who commercialize any good; by those who import products; those who acquired the goods seized by customs and those who acquire petroleum products from abroad.

Before going further on how ICMS operates, it is important to explain Complementary Law 87, from September 13th, 1996, also known as Lei Kandir. This law refers to state taxes related to the movements of goods and services and is the basis for ICMS.

What does it apply to?

1 – Operations related to the movements of goods, including food and beverages in bars, restaurants and similar establishments.

2 –Transportation of primary, industrialized or semi-manufactured products or services between states or municipalities.

3- Provision of costly communication services, including the emission, receiving, transmission, retransmission, repetition and the expansion of communication of any kind.

4 – Supplying of goods through service providing not foreseen by the municipalities tax burden.

5 – Supplying of goods with the provision of services subjected to ISS whenever the law determines the collecting of the state tax (ISS).

6 – The entrance of imported goods by private people or legal entity, even when the good is destined to consumption or is a permanent asset of the establishment.

7 – Provision of services abroad.

8 – The entrance in national territory of petroleum products (including lubricants, gas and liquid fuels originated from it), electricity when it is not destined to commercialization or industrialization, originated from intestate operations, being the taxation, then, in charge of the State.

Who pays for it?

Taxpayers are any private person or legal entity operating goods movements and the provision of transportation services between states and between municipalities with a commercial purpose or on a regular basis and communication services providing, even though the entire transaction has begun overseas.

It is also considered an ICMS taxpayer legal entities and private people who:

• Import goods, even though it is destined to consumption or is a permanent assets of the establishment.
• Recipients of services provided abroad or that have started abroad.
• Purchase of good seized by customs.
• Purchase of lubricants and petroleum based liquid or gas fuels, electricity from other state when it is not destined to commercialization or industrialization.

Nota Fiscal Paulista

As an attempt to restrain tax evasion, back in 2007, São Paulo state government launched Nota Fiscal Paulista, a plan to encourage costumers to demand that companies pay their ICMS.

The plan reimburses costumers with 30% of the ICMS effectively collected from commercial establishments. Costumers can receive the reimbursement in cash, credits, prizes or IPVA tax exemption.

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