Most Common State Taxes in Brazil
Brazil tax collection happens at federal, state and municipality levels. In this article, we will take a look at the most common state taxes in Brazil.
State taxes in Brazil
There are three taxes that are levied by states in Brazil.
ICMS stands for Imposto sobre Circulação de Mercadorias e Serviços, which is Portuguese for Tax on Circulation of Goods and Services. ICMS is a state value-added tax on sales and services and applies to the movement and supply of goods, as well as to transportation and communication services.
The ICMS rate is instituted by each state on the value of the goods and ranges from 7% to 25%, depending on which state the goods are headed to and on the type of goods.
ICMS is levied on individuals and legal entities in the following cases:
- Operations related to the movement of goods, for example food and beverages in bars and restaurants
- Transport of primary, industrialized or semi-manufactured products or provision of services between states or municipalities
- Provision of communication services, including the emission, reception, transmission, retransmission and repetition of any kind of communication signal
- Import of goods or services
In the following cases, ICMS will not be levied:
- Exported goods
- Provision of services abroad
- Inter-state operations of transport of oil products and electricity
- Trade of gold
- Provision of communication services, provided that they are free of charge
In 2014, ICMS amounted to BRL 428.526 million, which makes it the tax that generates the most revenue in Brazil.
IPVA stands for Imposto sobre a Propriedade de Veículos Automotores, which is Portuguese for Tax over the Property of Automotive Vehicles. IPVA is charged on the property of any automobile ground vehicle.
Its calculation basis and its rate depend on the vehicle profile characteristics and on the state in which the vehicle was licensed. IPVA rates in Brazil range from 1% to 4%. In order to know how much the IPVA rate is in a specific state, it is necessary to consult the local Detran's tables. Detran is the State Transport Department.
There are different IPVA rates for:
- Cars running on fuel
- Cars running on ethanol
- Cars running on electricity or gas
- Buses and minibuses
IPVA can be levied in a single installment, which usually benefits from a discount, or levied in three monthly installments. The due date for the payment of IPVA depends on the last number of the vehicle’s license plate.
It is worth mentioning that older vehicles may benefit from total or partial exemption of IPVA. This benefit varies from state to state, but generally cars older than 10 years are exempt from paying IPVA. In other states, this benefit is only granted for cars older than 20 years old. Finally, in some states cars older than 15 years start paying less IPVA, since they have already contributed to IPVA long enough.
In 2014, IPVA amounted to BRL 34.836 million.
ITCD, stands for Imposto sobre Transmissão Causa Mortis e Doação, which is Portuguese for Inheritance upon Death and Donation Tax. ITCD is a state tax levied on all donations and inheritances.
The calculation basis of the ITCD is the financial value of the asset that is donated/inherited. Each state is free to chose its own minimum value of transmission upon which it will start charging the ITCD. Generally, the values range from 2% to 8%. There is an additional 8% rate on the value of the asset, independently of the value of the asset inherited or donated when the beneficiary does not have a direct relationship to the former owner of the asset.
ITCD taxpayers are every individual or legal entity that receive goods or rights in the form of inheritance upon death or the donee, in cases of donations. The tax must be calculated and declared by the individual who benefitted from the inheritance or by the donee, who are obliged to anticipate the payment without prior supervision from the administrative authority. However, any tax exemption must be ratified by the State Treasury.
It is important to mention that, in cases where an heir renounces their inheritance in favor of another person, the assets that are transferred to the new beneficiary are considered to be a donation.
ITCD exemptions are granted only for:
- Physical assets with a value of less than BRL 20.000
- Cash donations up to BRL 2.000
- Contributions to funds controlled by the Municipal, State and National Child and Adolescent Rights Councils
In 2014, ITCD amounted to BRL 4.816 million.