Brazil is a country full of bureaucracy and taxes, and that’s sometimes could scare foreign investors. In order to make this process clear and easier, this article will outline the Brazilian import taxes levied on imported products.
The importation taxation treatment is the taxation incident over the entrance of foreign goods in customs territory. In Brazil the taxes levied on this type of products are:
- Imposto de Importação or Import Tax (II)
- Imposto sobre Produtos Industrializados or Tax Over Industrialized Products (IPI)
- PIS - Importação or PIS - Importation and Cofins - Importação or Cofins - Importation
- Adicional de Frete para Renovação da Marinha Mercante or Additional Freight for the Renovation of the Merchant Marine (AFRMM)
- CIDE - Combustíveis or CIDE - Fuels
- Imposto Sobre Circulação de Mercadorias e Serviços or State Tax on Circulation of Goods and Services (ICMS)
- Taxa de Utilização do Siscomex or Tax for Siscomex Use.
To calculate any type of tax levied on importations, it is mandatory to know the customs value of the foreign goods. According to the Customs Regulation, which can be found in the Decree No. 6.759 - all products subjected to import customs clearance are conditioned to customs value according to rules established by the Agreement Over Customs Valuation from GATT.
The customs valuation is very important because it works as a calculation basis for the Import tax. The import tax is a federal tax that exists mainly for economic regulation and protection. It’s levied on foreign products in order to prevent unfair competition with Brazilian products.
The Brazilian import tax varies according to the products' characteristics and country of origin. Its rates are established by the TEC - Common External Tariff - a customs tariff shared by Mercosur countries and is based on the Mercosur Common Nomenclature (NCM).
TEC defines the non-existence of Import Tax for trade activities between Mercosur members, but is applied to countries that aren’t part of the economic bloc. The Import Tax varies from 0 to 20% rate and is calculated according to formula below:
- II = TEC (%) x Customs Value
Tax Over Industrialized Products
In Brazil there’s a table named TIPI, which is based on NCM that comprises products in which the Tax Over Industrialized Products is incident. The IPI is a federal tax incident over products subjected to any type of industrial process occurring in Brazil or abroad.
Despite its collection nature, the tax exists to equalize the costs of foreign industrialized products to national ones. The calculation basis for IPI are the customs value of the good added to the import tax value. Some products from chapter 21 and 22 of NCM are subjected to the tax for product unity or quantity. IPI is calculated by the formula below:
- IPI = TIPI (%) x (Customs Value + II)
PIS - Importation and Cofins - Importation
The federal social contributions PIS and Cofins finance the Brazilian social security and are also levied on imported goods. The social contributions have equal rates for national and foreign products. Usually the PIS - Importation rate are 1.65% and Cofins - Importation are equivalent to 7.6%. The calculation basis for both contributions is the customs value added to ICMS incident over the imports and to the contributions own values, since they are included in the final price of goods.
- PIS = PIS Rate x (Customs Value + ICMS + PIS + Cofins)
- Cofins = Cofins Rate x (Customs Value + ICMS + PIS + Cofins).
Additional Freight for the Renovation of the Merchant Marine
To support the development of marine merchants and the construction and recovery of the Brazilian naval industry, AFRMM was created by the Federal Government. Levied on unloading operations, the tax is charged at the following fixed rates:
- 25% for long distance sea transport
- 10% for coastal transport
- 40% for the river and lake transportation of liquid goods in bulk form transported to the North and Northeast regions of Brazil.
CIDE - Fuels
In order to regulate and adjust fuel prices in Brazil, the Federal Govenment created the CIDE - fuels, a tax levied on fuels and its derivatives importation and commercialization. The calculation basis for this tax is referent to commercialized quantity of the goods in tons or m³ added by the fixed rates below:
- Gasoline: 860.00 BRL per m³.
- Diesel: 390.00 BRL per m³.
- Kerosene (aviation fuel): 92.10 BRL per m³.
- Fuel oils: 40.90 per t.
- Liquefied petroleum gas (LPG), including the one derived from natural gas and naphtha: 250.00 BRL per t.
- Ethanol fuel: 37.20 per m³.
- CIDE - Fuels = CIDE - Fuels Rate x Product Quantity
State Tax on Circulation of Goods and Services
Different from all other taxes mentioned until now, the ICMS is a State tax, which means that its rates vary from State to State. The tax is levied on the circulation of products in the Brazilian market and on interstate and intercity transportation or communication services. But ICMS is also charged over imported goods with rates varying from 0% to 25%. To calculate ICMS the customs value must be added to Import Tax, IPI, ICMS, any other taxes incidents over imported products and import duties, such as storage.
- ICMS = ICMS Rate (%) x (Customs Value + II + IPI + ICMS + Other Taxes + Import Duties)or
- ICMS = Alíquota ICMS(%) x (Customs Value + II + IPI + Other Taxes + Import Duties) / [1 – ICMS Rate (%)]
Tax for Siscomex Use
Any importer that aims to develop trade activities with Brazil must first apply for the Brazilian Integrated Foreign Trade System, most known as Siscomex. The system is an electronic platform where foreign merchandise transactions can be registered and controlled by the Brazilian Government. To use this platform, a fee is charged to the importer. The amount charged by Siscomex varies according to the NCM number of the products imported to Brazil. varying from 29.50 BRL to 185.00 BRL.