Sales Taxes in Brazil
We already wrote several articles about sales taxes in Brazil, but discussing each tax separately. In this article, we have made a summary of all the taxes levied on sales activities in the country.
In Brazil, the taxes and contributions levied on sales activities are organized as follows:
- Federal: IRPJ, PIS, COFINS, CSLL, IPI (Industry), Import Tax and Export Tax
- State: ICMS
- Municipality: ISS
Those taxes are already well explained in other articles of The Brazil Business. By clicking on each tax above, you will get access to that detailed information.
That is why the point of this article is to summarize those taxes and contributions levied on sales activities, giving their main characteristics and commenting other issues related to the Brazilian Taxation System.
Federal Taxes
IRPJ (Imposto de Renda sobre Pessoa Jurídica)
- Tax levied on the incomes of companies of all kinds.
- Progressive tax: the more a company earns, the more it will pay. This way, the tax's aliquots are directly proportional to the tax payer's income.
- Aliquots can be different for each field of business.
- Companies with annual income over BRL 240,000.00 have to pay a surtax of 10%.
PIS (Programa de Integração Social)
- Payable by all legal entities.
- Contribution destined to finance the payment of insurance, unemployment allowance and participation in revenues from agencies and entities for public and private workers.
- Aliquots vary according to the company’s operations and taxation arrangement.
COFINS (Contribuição para o Financiamento da Seguridade Social)
- Payable by all legal entities.
- Contribution destined to finance the Brazilian Social Security.
- Aliquots vary according to the company’s operations and taxation arrangement.
CSLL (Contribuição Social sobre o Lucro Líquido)
- Tax levied on the incomes of companies of all kinds.
- Contribution destined to finance the Brazilian Social Security system.
- Aliquots vary according to the company’s operations and taxation arrangement.
Import Tax (Imposto de Importação)
- Customs duty
- Applied to the entrance of products in the Brazilian territory.
- Rates vary according to the kind of products to be imported.
- Importa Fácil: imports up to USD 3000.00 pays 60% on Import Tax.
Export Tax (Imposto de Exportação)
- Customs duty.
- Applied to the exit of national products from the Brazilian territory.
- Rates vary according to the kind of products to be imported.
IPI (Imposto sobre Produtos Industrializados)
- Tax levied on industrial products and companies.
- Not all products or industrial operations are subject to IPI.
- Unlike the ICMS, the rate is applied on the final price of the products.
- Like the ICMS, IPI is a non-cumulative tax.
- The IPI rate is not the same for all products.
- It is calculated on a monthly basis
- Every now and then, the government exempts some industrialized products from paying IPI to incentive consumption.
State Taxes
ICMS (Imposto sobre Circulação de Mercadorias e Serviços)
It focuses on the movement of goods and the provision of intrastate and interstate transport, communications and electricity supply.
The rates for ICMS will vary accordingly to the different economic activities.
There are cases of exemption in the specific ICMS regulations provided by each Brazilian state.
The ICMS rate will be different for each Brazilian state.
The rate also varies depending on the type of product, destination or origin etc.
- The value of ICMS is passed on to consumers, inlaid in the value of products.
- It is a non-cumulative tax, that is, the value incident in a transaction will be compensated from the subsequent operation.
- It is calculated on a monthly basis.
Municipal Taxes
ISS (Imposto sobre Serviços de qualquer Natureza)
- Tax levied on services of any kind.
- The rates vary from municipality to municipality.
- The Federal Government stipulated a 5% maximum rate.
- The calculation basis is the final price of the services rendered.
- It is calculated on a monthly basis.
Taxation arrangements and tax rates
Some taxes’ rates (IRPJ, CSLL, PIS, Cofins) will depend on the company’s type of taxation arrangement. There are basically three types of taxation arrangement foreseen in the Brazilian law:
1) Lucro Real (Actual Income)
Under this method, the rate of the taxes will be applied over the net profit ascertained (revenue minus certified expenses). The taxpayers can also chose to establish their profits on an annually or quarterly basis. The Lucro Real system is indicated to companies with an uncertain profitability or a very variable profit during the year. The rates are:
IRPJ: 15% of the net profit.
CSLL: 12% for financial institutions and 9% for other institutions.
PIS: Commerce, Industry and Services: 1.65%
Cofins: Commerce, Industry and Services: 7.6%
2) Lucro Presumido (Presumed Income)
Under this arrangement, the taxes are levied on a presumed profit, pre-established by the Brazilian tax legislation. In the Lucro Presumido, does not really matter how much the company have profited. To compose the calculation basis for the taxes, the fixed percentages below will always be used, what makes easier to determine their value.
Overall, this system tends to be the best alternative for companies with a guaranteed annual profit higher than the percentages established by the Federal Revenue.
For companies with annual billing revenue in excess of BRL 48.000.000, the Lucro Real system is mandatory. The calculation basis is determined according to the following fixed coefficients:
IRPJ: 15% on the presumed profits
CSLL: 9% on the presumed profits
The aliquots above are calculation over an assumed profit:
12% of the gross revenue when it comes to commercial and industrial activities as well as hospital and transportation services.
32% of the gross revenue for services in general; business brokerage; administration, hiring out or transfer of movable or immovable assets and rights of whatever nature.
PIS: Commerce, Industry and Services: 0.65%
Cofins: Commerce, Industry and Services: 3.0%
3) Simples Nacional
Small businesses and mini or small sized companies must pay IRPJ, CSLL, COFINS and PIS in a unified payment, according to the Simples Nacional law.