ICMS rates aren't the same throughout Brazil and this can make the payment of the tax very difficult to understand. In this article we will give some information regarding this subject.
ICMS is the abbreviation for the Tax on Circulation of Goods and Services, which is calculated on several types of services. It applies to the movement of goods, transportation and communication services, and to the supplying of goods. It is not a tax established by the Brazilian federal government; actually, each state and the Federal District have the autonomy to institute their own rules, within the limits of law.
ICMS Tax Base
Being a tax in charge of the states makes ICMS rates quite different depending on the place where the circulation of goods and the provision of services are. The tax base for ICMS is obtained by the sum of:
- customs valuation
- import tax
- tax on industrialized products
- tax of exchange transactions
- any other taxes or contributions on customs or customs expenses
- the value of the own ICMS.
How is the Tax Calculated
ICMS is not a cummulative tax; it applies for every step of the movement of goods separately. In each one of these steps, it is necessary to issue a nota fiscal, because it is based on these information that the tax will be calculated.
In most cases, companies pass this tax to consumers, embedding the tax value in the price of products. The goods are taxed according to their essentiality: on the usual and basic Brazilian products, such as rice and beans, the ICMS charged is lower than in superfluous products, like cigarettes or perfumes, on which ICMS taxes is higher.
However, when it comes to the services of electricity, fuel and telephone system, for instance, which are necessary to a better life condition, the ICMS tax in some states is really high. This makes us rethink about the "policy of essentiality”.
Charged when there is movement of goods from one state to another, the interstate ICMS has two different aliquots: 12% for the less developed states and 7% for the more developed ones.
Currently, when the good is transferred from one state to another, the producer state gets 7% or 12% of the value of the product and the consumer state gets the rest of the amount that completes the rate. So, for instance, if a good is charged in 18% in the state of destination, and the producer state gets 7% or 12%, the consumer state will get 11% or 6% of it.
There is a measure of establishing a single aliquot for all the interstate transactions, which would decrease the fiscal war between the states. However, states that currently have a higher aliquot claim that would be in disadvantage if all the rates were reduced to 4% because they are not as “modern” and industrialized as the others.
Currently, the states from the North, Northeast and Mid-West regions plus Espírito Santo pay an average rate of 12% of ICMS, and the other states pay a 7% rate. The proposal is to decline the 12% rate of the three regions' and the state's to 4% in 8 to 12 years, keeping the rate on industrialized products at 7%; for the other states, the 7% rate would be decreased to 4% in three years.
In December 2012, the president Dilma Rousseff approved a provisional measure that gradually decreases the percentages of the ICMS rate. For the North, Northeast and Mid-West regions, plus the state of Espírito Santo, destined to the Southeast and South regions, it was established that the rate would be:
- 11% from January 1, 2014 to December 31, 2014
- 10% from January 1, 2014 to December 31, 2015
- 9% from January 1, 2014 to December 31, 2016
- 8% from January 1, 2014 to December 31, 2017
- 7% from January 1, 2014 to December 31, 2022
- 6% from January 1, 2014 to December 31, 2023
- 5% from January 1, 2014 to December 31, 2024
- 4% from January 1, 2025 on.
If the operations are from the Southeast and South regions, destined to the North, Northeast and Mid-West regions, plus Espírito Santo, the aliquot will be of:
- 6% from January 1, 2014 to December 31, 2014
- 5% from January 1, 2014 to December 31, 2015
- 4% from January 1, 2016 on.
To all the other operations, and service provisions, the aliquot will be:
- 9% from January 1, 2014 to December 31, 2014
- 6% from January 1, 2014 to December 31, 2015
- 4% from January 1, 2016 on.
This provisional measure is part of a proposal which is in the Senate to establish a law that will reduce the ICMS rates and unify them. Until now, however, there has been no consensus between the senators.
Intern Rates per State
|Mato Grosso do Sul||17%|
|Rio de Janeiro||19%|
|Rio Grande do Norte||17%|
|Rio Grande do Sul||17%|