Understanding corporate tax in Brazil is essential to the success and good health of your company while entering the Brazilian market. Brazil, the largest economy in Latin America, has a complex tax system whose rules are defined in the Federal Constitution and based on the various regulations issued by tax authorities.
All companies operating in Brazil are subject to the payment of taxes. However, taxes vary according to the business activity that is developed. Learn everything you need to know about corporate tax in Brazil before taking advantage of business opportunities in ‘the giant of South America’.
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Corporate tax in Brazil
The Brazilian tax system is regulated by the Federal Constitution, and other state and municipal laws. In addition, there are some specific tax regulations that apply to companies operating in the country, depending on their business activity. In accordance with corporate tax compliance in Brazil, each company must pay taxes to the federal, state and municipal tax authorities.
Federal taxes
Import tax (Imposto de Importação): The tax on the importation of foreign products is applied from the entry of said products into Brazilian territory. Its calculation is based on a specific rate defined by law or it can be based on the price that the product would reach once it is established in the Brazilian market.
Export tax (Imposto de Exportação): The tax on the export of national products is charged when these goods are taken outside the Brazilian territory. The tax calculation base is equal to the unit of measure adopted by the tax law, or a tax on the normal price that the product has reached at the time of export.
Tax on industrialized products (Imposto sobre produtos industrializados): The tax on industrialized products is collected from customs clearance or when the products leave the importing, industrial or commercial establishments. According to corporate tax regulations, a product is considered industrialized when it has undergone a process that changes its nature or purpose for consumption.
This tax is calculated according to the normal price of the product plus the amount of import tax. Please note that the fees required for the product to enter Brazil and exchange rates must be paid. Likewise, you must know that this tax is selective based on the essentiality of the products.
Income Tax on Legal Entities (Imposto sobre a renda das pessoas jurídicas): Income tax is paid from the acquisition of economic availability, as a product of capital, economic activity and patrimonial properties. The basis for calculating the tax is the actual amount, arbitrated or assumed, of taxable income.
Tax on Financial Transactions (Imposto sobre operações financeiras): Tax on financial transactions is payable on credit, foreign exchange, insurance and/or securities transactions. It is calculated based on the amount of the corresponding financial transactions.
Foreign executives doing business in Brazil must note that there are other types of contributions applicable to company revenues, such as the PIS (Social Integration Program) and COFINS (Contribution for Social Security Funding). Furthermore, you must consider payroll taxes like FGTS (Indemnity Find) and Social Security Contributions (INSS).
State taxes: tax on the circulation of goods and services
The tax on the circulation of goods and services (imposto sobre circulação de mercadorias e prestação de serviços) is a corporate tax that is applied to the movement of goods and services in Brazil. According to corporate tax regulations in the country, this tax applies in the following cases:
- When the merchandise is transported from a commercial, industrial or producer establishment.
- Upon entering a commercial or industrial establishment. It also applies when a good is imported and transported to a national establishment.
- This tax is also applied to the supply of food, drinks and other goods in restaurants, bars, cafes and similar establishments.
The calculation of the tax on the circulation of goods and services is based on the value of the transaction from which the goods are shipped. If the value is not determined, the calculation basis will be the current price of the merchandise. Note that the tax is non-cumulative, the amount collected in previous transactions by the same or another State being deducted.
Municipal taxes: tax on services
The tax on services (Imposto Sobre Serviços) is applied to the provision of services defined by law. This applies even if the taxed activity is not the predominant activity of the company. The basis for calculating this tax is the price of the service.
Foreign executives must note that Brazilian municipalities can determine the collection of specific taxes for certain kinds of activities. Hospitals, for example, are required to pay taxes on the collection of garbage in their respective establishments.
Engage with a local advisor to understand corporate tax in Brazil
At Biz Latin Hub, our team of legal and accounting local and expatriate professionals have broad experience assisting foreign companies to do business in Brazil, while remaining in compliance with local corporate tax regulations. With our full suite of market entry and back-office multilingual services, we are your single point of contact in Brazil and Latin America for corporate tax advisory services.
Contact us today to receive personalized assistance on company formation, corporate compliance, legal representation, visa processing, and other business solutions. Learn more about Brazil’s legal and counting compliance.
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