COFINS for Dummies
This article will provide an introduction to Cofins, one of the contributions destined to finance the Brazilian Social Security system.
COFINS stands for Contribuição para o Financiamento da Seguridade Social (Contribution for Social Security Financing). It is a federal social contribution levied on the gross revenue of businesses in general. All private legal entities or equivalent are qualified as Cofins taxpayers.
Together with other social contributions, such as PIS and INSS, Cofins is destined to finance the welfare, health and social assistance policies in Brazil. After the Income Tax, Cofins is the second largest source of tax collection by the Brazilian government.
Aliquots
The calculation basis for the Cofins contribution is the total gross revenue of a company during the month.
Lucro Real
Commerce, Industry and Services: 7.6%
Non-cumulative regime: In this regime, the value of the contribution is calculated on the company’s monthly revenue, understood as the total revenues earned by the corporation minus some values configured as credits foreseen in the legislation.
Lucro Presumido
Commerce, Industry and Services: 3.0%
Cumulative regime: In this regime, there are no deductibility of credits. The value of the contribution is calculated directly on the calculation basis.
Simples Nacional
- Commerce and Industry: from 0.00% to 1.60%
- Movable property lease: 0.00% to 2.42%
- Services: from 1.28% to 2.63%
The Simples Nacional arrangement has a unique aliquot for all the taxes. But that does not mean that the companies are not paying the PIS contribution. The aliquots vary accordingly to the company's annual income. Consult all the taxes' aliquots for Simples Federal arrangement 2012 here
Exemptions
The following activities are exempted from paying the Cofins and for that can be deducted from the calculation basis of the contribution:
Canceled and returned sales
Income from sale of fixed assets
Revenues generated from the sale of electricity by the Itaipu Hydroelectric Power Plant
Resources received as transfers, from the general budget of the Union, states, Federal District and municipalities to companies and public joint stock companies
Revenue related to the export of goods abroad
Revenue from services rendered to an individual or legal entity resident or domiciled abroad, whose payment represents inflow of foreign exchange
Income on the supply of goods or services for use or purchase of board ships and aircraft in international traffic, when the payment is made in convertible currency
Earned by Brazilian shipyards in construction activities, maintenance, modernization, conversion and repair of boats registered at the Special Brazilian Registry (REB)
The freight of goods transported by ship from Brazil to countries abroad registered in the REB
Revenue from the freight of transported goods between the country and abroad by ships registered in REB
Income from sales by the producer-seller to trading companies, provided to be exported abroad