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An analysis based on tax challenges that affect Brazil’s import process
There is a consensus among analysts and decision-makers in the import management area that
Brazil’s general rising costs allied to the high complexity of the taxation system impacts the
sector that currently constitutes the main challenge that companies must face to guarantee
more efficient management and better business results. To give an idea, in 2014, Brazil
registered an average of 81 legal changes per month that will directly impact the foreign trade
sector.
Added to these factors are a profound lack of knowledge of certain opportunities available in the
local market and which, on being adopted, can bring a significant improvement in
competitiveness.
Experience shows that the secret is in knowing the incident legislation in detail, identifying and
adopting available opportunities, and relying on strategic and ongoing tax planning,
accompanying the evolution of the processes and market itself. Below are some
recommendations that can make a difference:
1. Taxes and tax rates that affect imports
Currently, there are five specific taxes and rates, applied on imported products, and only one of
them – II, the Import Tax – is not recoverable through tax credits. With the exception of ICMS
(tax on transactions related to the circulation of goods and provision of interstate, intermunicipal
and communication transport services), which is a state tax, the others are all federal:
• IPI: Industrialized Products Tax;
• COFINS: Social Contribution for the Financing of Social Security;
• PIS: Social Integration Program.
On the last day of January, Provisional Measure 668 was published in Brazil, which altered Law
10,865 / 04, raising the contribution rates for PIS / PASEP-Import and COFINS-Import.
According to the Government, this is an initiative to protect domestic products and increase
Federal revenues by R$ 694 million in as early as 2015. On becoming valid from the next day,
01/5, the new measure will require companies to import goods, in most operations, the
assessment of a tax rate of 11.75% (2.10% for PIS and 9.65% for COFINS) on the customs
value of the goods. Some companies will be subject to specific rates for certain products.
Example of how to calculate the Import Tax and other indirect taxes affecting operations
in Brazil
Duty Computation
Average Rate (%)
Value
Value of goods (CIF)*
(A)
1,000.00
Basic Custom Duty (II)
(B) = 12%** of (A)
120.00
Total
(C) = (A) + (B)
1,120.00
Production Duty (IPI)
(D) = 10%** of (C)
112.00
Total
(E) = (C) + (D)
1,232.00
Contribution to the Social Integration Plan (PIS****)
(F) = 2.1%** of (A)
21.00
Contribution for Social Security Financing
(COFINS****)
(G) = 9.65%** of (A)
96.50
Total
(I) = (E) + (F) + (G)
1,349.50
Tax over the circulation of goods and services
(ICMS***)
(J) = 18%*** of ( I / 1-0,18 )
296.23
Total
(L) = (I) + (J)
1,645.73
* This value includes loading and handling charges incurred in Brazil;
** The applicable rate varies according to tariff schedule/product
*** The applicable rate varies according to state/tariff schedule/product
****PIS/COFINS rates will be increased by May 2015 (PIS from 1.65 to 2.1 / COFINS from 7.6 to
9.65)
2. SH and NCM classifications
All tax rates of federal taxes affecting imported products can be located directly through their
customs classification. In 1995, MERCOSUR member countries (Argentina, Brazil, Paraguay,
Uruguay and Venezuela) adopted a classification method based on the SH [Harmonized
Commodity Description Coding] known as NCM (Common Nomenclature of MERCOSUR). The
NCM currently has eight digits – the first six are classifications according to SH, and the
remaining two are specific to NCM.
00
00
00
0
0
Sub Item
Item
Sub Position
Position
Category





th
8 digit of NCM
th
7 digit of NCM
First 6 digits of the SH
First 4 digits of the SH
First 2 digits of the SH
Ex-Tariff
There are also tariff exceptions in Brazil. The Ex-Tariff is a special taxation scheme with a
temporary reduction of the import duty rate for CAPITAL, CAPITAL GOODS and COMPUTING
GOODS, COMPUTERS and TELECOMMUNICATIONS GOODS that have no domestic
production.
3. Specific government incentives
Brazil now has specific market incentive opportunities, applicable to determined segments of
the economy. Through these incentives, the Brazilian Government reduces or exempts
companies from import taxes, as an incentive to these sectors in the domestic market. An
example of this is the recent change in the Import Duty taxation of hybrid vehicles without
external recharging technology (a combustion engine that works with the aid of an electric or
pneumatic drive system), where the average tax rate of 35% in the I.I. is reduced to a 0%-to-7%
band, depending on the vehicle model.
4. Counting on TLCs
The more than 19 free-trade agreements (FTAs) that Brazil has with various countries are also
worth mentioning. These are agreements that reduce or even allow the tax rates of the Import
Duty to reach zero:
Regional Tariff Preference between LAIA
(Latin American integration Association)
(PTR-04)
Cultural property Agreement between LAIA
countries (AR-07)
Brazil - Uruguay (ACE-02)
Mercosur (ACE-18)
Mercosur - Bolivia (ACE-36)
Mercosur - Mexico (ACE-54)
Mercosur - Peru (ACE-58)
Brazil - Guiana (ACE-38)
Brazil - Venezuela (ACE-69)
Mercosur - India
Mercosur / SAC (South Africa) STILL NOT
VALID
Mercosur / Palestine - STILL NOT VALID
Seed Agreement between LAIA countries
(AG-02)
Brazil - Argentina (ACE-14)
Mercosur - Chile (ACE-35)
Brazil - Mexico (ACE-53)
Mercosur - Mexico Automotive Sector (ACE55)
Mercosur - Colombia, Ecuador and Venezuela
(ACE-59)
Brazil - Suriname (ACE-41)
Mercosur - Cuba (ACE-62)
Mercosur / Israel
Mercosur/Egypt - STILL NOT VALID
5. Special service arrangements to increase competitiveness
There are regulations in the country Special Duty Scheme (REAs) that offer the suspension or
exemption of all or part of the taxes affecting imports. However, studies show that although
effective, these schemes are still under used by a significant number of companies – either
through lack of understanding or uncertainties inherent in their use. The OER has, for the most
part, focused production on domestic production intended for export, and for this reason they
suspend or exempt companies at the time of import with an export commitment.
6. Siscoserv challenges
A study carried out by the GTM Thomson Reuters team in Brazil showed that two years after
the implementation of the new rule, 50% of companies were still not in full compliance with
Siscoserv (Integrated System of Foreign Trade Services, Intangibles and Other operations to
Produce Changes in Equity) – a new government requirement that affects all import and export
operations of services performed by Brazilian companies (except Simple and MEI), cultural,
sports and religious institutions and individuals whose operations exceed US$30 thousand
monthly. According to the Ministry of Development, Industry and Trade, Brazil has over US$100
billion worth of transactions annually in services with a deficit of US$35 billion. With Siscoserv,
the government intends to ascertain what is being sold and contracted to create public policies,
encouraging the export of services and to protect sensitive areas of the national economy.