Brazil to implement VAT

Mon 21st Aug 2017

Brazil has confirmed that it plans to consolidate its existing complex indirect taxes into a single, state-wide Value Added Tax regime.  A single excise tax regime will be introduced at the same time.

The aim is to significantly reduce the complex consumption tax regime, and eliminate double taxation.  The Brazilian Ministry of Finance currently estimates that the average company spends 2,600 hours per annum calculating, reporting and paying taxes.  Brazil’s aim is to reduce this to 600 hours.  Brazil is regularly rated in business surveys as having one of the most complex indirect tax systems in the world.

The existing consumption taxes to be combined into the new VAT include:

  • ICMS, Imposto sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual e Intermunicipal e de Comunicações – the tax which applies to the movement of goods, transportation, communication services and other general supplies of goods. The current tax level is between 7% and 25%.
  • ISS, Imposto sobre Serviços – the municipal tax on the provision of services. The rate ranges to up to 5%.
  • IPI, Imposto sobre Produtos Industrializados – the federal tax on manufactured goods. The rate can be up to 300%.
  • COFINS, Contribuição Social para o Financiamento da Seguridade Social – the federal tax contribution to the Social Security Financing paid on company revenues. The rate can be up to 7.6% on monthly revenue depending on the activities of the company.

Details of the new VAT regime, and implementation date, will be published by September 2017.

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