Brazil is a Federal Republic, where both the federal government and individual states have their own legislation and regulations. The country’s indirect tax system is notably complex and has undergone numerous changes in recent years.
Brazil has several indirect tax regimes, including:
| ICMS (Imposto sobre a Circulação de Mercadorias e Prestação de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação) | Tax on Circulation of Products, Transportation and Communication Services | State Sales Tax |
|---|---|---|
| IPI (Imposto sobre Produtos Industrializados) | Tax on Industrialized Products | Federal VAT Tax |
| ISS (Imposto sobre Serviços) | Tax on Services | Municipal Tax (governed by a Federal Law) |
| COFINS | Social Contribution for Social Security Financing | Federal Tax (under non cumulative regime) |
| PIS | Social contribution: Employees’ Profit Participation Program | Federal Tax (under non cumulative regime) |
In Brazil, the supply of goods and services is subject to at least two types of VAT, but never more than three. ICMS and ISS are mutually exclusive for any given operation.
The general tax rates are as follows:
| ICMS | Generally 17-19% for products upon importation and transactions within the same state. Interstate circulation of goods can be taxed at 4%, 7%, or 12%, depending on the states involved. State-specific rates may also apply. |
|---|---|
| IPI | Rates are product-specific, ranging from 5-15% as listed in the official TIPI. |
| ISS | Rates vary from 2-5% depending on the municipality, the location where the service was rendered, and the nature of the service. |
| COFINS | For the non-cumulative regime, the combined rate for PIS and COFINS is generally 9.25%. For the cumulative regime, the rate is 3.65%. |
| PIS | For the non-cumulative regime, the combined rate for PIS and COFINS is generally 9.25%. For the cumulative regime, the rate is 3.65%. |
The tax rates for the supply of goods and services can vary based on the transaction type, the origin and destination of the goods, and their tariff codes. Given the number of tax authorities and taxable events under the four types of Brazilian VAT, the applicable rates can differ significantly depending on the specifics of each transaction.