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:
- In Portuguese Import Tax is named Imposto sobre a Importação and often referred to by the abbreviation II.
II is one of the components of the Brazilian customs taxes, just like IE.
Import duties are charged when foreign products enter the country. The taxpayer is usually the importer, but in some cases the taxpayer could be the buyer. The function of import taxes is purely economic or regulatory and it's different for each good. The values of the II rates can be found in the Tarifa Externa Comum, also known as TEC/NCM, the Common External Tariff established by Mercosur.
TEC establishes the non-existence of Import Tax (zero rate) to trade activities between Mercosur members, but when imports involves a third country – that's not a member – TEC is applied. The tax rate varies from 0 to 20%, depending on the goods involved in the transaction.
- In Portuguese Tax on Industrialized Products is named Imposto sobre Produtos Industrializados and often referred to by the abbreviation IPI.
The Tax on Industrialized Products applies for national and foreign products which have been modified in some way for consumption or use. The basis of calculation is the retail sales price in Brazil; for imports, it is the sales price of the good and the import duty, plus other required fees.
IPI is used as incentive for or discouragement of the consumption of some goods, and it has been decreased for the sale of products such as the low-end appliances, furniture and cars. The rates vary from zero to 20%.
- In Portuguese Additional Freight for the Renovation of the Merchant Marine is named Adicional de Frete para Renovação da Marinha Mercante and often referred to by the abbreviation AFRMM.
It's a Brazilian tax created to support the development of the merchant marine and of the construction and recovery of the Brazilian naval industry.
The tax is levied upon unloading operations at all Brazilian maritime ports. However, there are a few exceptions where AFRMM does not apply:
- Unloading of goods from Mercosul.
- River or Lake transportation except liquid goods in bulk form transported to the North and Northeast regions of Brazil.
The freight value is the calculation basis for this tax. The AFRMM rate is charged as follows:
- 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.
- Brazil is a country of many taxes and that’s no surprise for anyone. The Contribuição sobre Intervenção do Domínio Econônomico (best known as CIDE) is an important and complex tax levied on some specific products in Brazil. The article will outline the main aspects of this tax and how it’s applied throughout the country.
What is CIDE?
The CIDE is the abbreviation of Contribuição sobre Intervenção no Domínio Econômico, which is a contribution of Intervention in the Economic Domain can be levied in many areas of the economy. The contribution is always for the improvement or activities linked to the sector in which its incident.
The contributions of Intervention in the Economic Domain have always been a subject of controversy within the National Tax Code regarding its taxation nature. With the 1988 Constitution, Chapter I, The National Tax System in art. 149, established that such contributions are compulsory and therefore are taxes. The CIDEs, are used as an instrument of economic policy to deal with certain situations that require intervention from the State in the economy.
Types of CIDEs
CIDE is also a responsibile for the Brazilian Government and works as an instrument for State economic intervention, there are a few types of CIDEs that are in force in Brazil nowadays:
CIDE - Remittances to Abroad
| CIDE | CIDE - Remessas para o Exterior/CIDE - Royalties or CIDE - Remittances to Abroad |
| Taxable Event | Payments of amounts to residents abroad, by a source located in Brazil, such as payment of royalties, technical services, copyrights, and other compensation derived from contractual obligations involving technology transference. |
| Taxpayers | Holders of use or exploitation licenses and signatories of technology transference agreements. |
| Calculation Basis | Value paid or remitted to abroad. |
| Rate | 10% |
| Designation | Financing of Science and Technology Programs, research incentives and technological innovation. |
CIDE - Fuels
| CIDE | CIDE - Combustíveis or CIDE - Fuels |
| Taxable Event | Importation and Commercialization of oil, natural gas and others fuels in the internal market. |
| Taxpayers | Fuel Producers and/or Importers. |
| Calculation Basis | Measure unity, the m³, ton. |
| Rate | Has an specific rate, a amount of BRL by m³ or by ton.
|
| Designation | Financing of Environmental Projects, Projects for Transport Infrastructure and Payments of subsidies for fuels prices and transportation. |
FUST and Funttel
| CIDE | FUST and Funttel |
| Taxable Event | Generation of telecommunication for public or private services. |
| Taxpayers | Companies that are Service Providers of telecommunication services in Brazil. |
| Calculation Basis | Gross Revenue of the Companies. |
| Rate | 1.0% for FUST 0.5% for Funttel |
| Designation | Both are funds turned to the development and implementation of the telecommunication sector in Brazil, in order to make telecommunication services universal in the country. |
- In Portuguese State Tax on Circulation of Goods and Services is namedImposto Sobre Circulação de Mercadorias e Serviços and often referred to by the abbreviation ICMS .
ICMS is the Brazilian tax charged upon sales, services, movement of goods, transportation and communication services, and supplying of any goods.
The tax is paid by legal entities and citizens responsible for the commercialization of any good, importation of goods, acquisition of products seized by customs and acquisition of petroleum products derived from other countries.
Since ICMS is a state tax, it's up to each Brazilian State to establish their own tax rate, which means that the ICMS rate varies among the states of Brazil. In 2013, the rates of ICMS were:
- 17% in Acre, Alagoas, Amazonas, Amapá, Bahia, Ceará, Distrito Federal, Espírito Santo, Goiás, Maranhão, Mato Grosso, Mato Grosso do Sul, Pará, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, Rio Grande do Sul, Rondônia, Roraima, Santa Catarina, Sergipe e Tocantins.
- 18% in Minas Gerais, Paraná and São Paulo.
- 19% in Rio de Janeiro.
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.
Import Tax
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.
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