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Brazil Import Regs.: Tariffs/Taxes

Come here to discuss the Brazil's standards of various industry, products registration and import regulations as well as tariff information.

Brazil Import Regs.: Tariffs/Taxes

Postby bridgat » Mon Nov 17, 2008 3:40 pm

May 1, 2004, the GOB published in the Gazeta Official the official version of the PIS/COFINS Law extending the application of these taxes to imports of goods and services. Law 10,865 of April provides the official sanction of MP#164 approved by the Executive branch on January 29, 2004. The effective date is May 1, 2004 for this Law. The tax rate will be generally 1.65% for PIS/PASEP and 7.6% for COFINS; however, there are product and service exceptions, suspensions, etc. (these exceptions,suspesions, etc. are spelled out in Chapter VI of Law 10.865/2004, Law 11.051/2004, Law 5.653/2005, and Decree 5.691of 2/3/2006). Additional legislation was published, exempting and/or reducing PIS/Confins rates on particular services and products (See, for example Decree #5171 of August 6, 2004). Also, PIS/PASEP rates on specific products/services can be lower than the general rate and can vary between 0% and 2%; COFINS rates can vary between 0% and 10.5%. These taxes apply to the CIF+misc taxes of 1%+duties (II)+industrial products tax (IPI)+tax on goods/services(ICMS). On August 1, 2008, the GOB modified Law 11.787 to reduce the PIS/COFINS rates to zero on key inputs in the production of selected consumer goods.

It appears in Law #10.865, Article #9, Section II, Sub-section c that PIS/COFINS contribution taxes do not apply to imports under the "Simplified regime" and other Special Import Regimes. Personal-use medicines shipped in this way are exempt. A list of other exempted imports are provided in Article #9.

In addition, the GOB issued Complimentry Law 116 in 2003 which allowed the Municipal Governments in Brazil to extend the ISS tax to service imports as of January 1, 2004. The Law allowed for tax rates to be between from 2% to 5% (Rio de Janeiro applies a 5% rate and Vitoria applies a 2% rate). The petroleum sector currently is not subject to most Federal taxes under the customs regime "Repetro" will be, in all likelihood, subject to the ISS and the above social taxes (COFINS/PIS).

The extra-zonal tariff surcharge of 1.5% was eliminated as of January 1, 2004.

Brazil and its MERCOSUL partners implemented the MERCOSUL common external tariff (CET) on January 1, 1995. The CET levels range between zero and 20 percent, with the exception of tariffs on telecommunications equipment, computers, some capital goods, and products included on Brazil's national list of exceptions to the CET, such as shoes, automobiles and consumer electronics. For products covered by the CET, the maximum Brazilian tariff is now 20 percent (with some exceptions, including autos/auto parts) ; the most commonly applied tariff is 17 percent. Duties are levied ad valorem on the cost, insurance, and freight (c.i.f.) of the import. (It should be noted that the GOB is changing its tariff rates as permitted for selected items by the Mercosur until 2006. This changes primarily effect goods in HS categories 84, 85, 90, etc.)

In addition to the import duty, the following taxes are generally applied on imports:

There are certain miscellaneous taxes, which are about 1% of the CIF value (including a 25% tax on transport value {merchant marine tax}; port handling tax of about 0.5%; and some other small charges.

The Industrial Products Tax (IPI) is a federal tax levied on most domestic and imported manufactured products. It is assessed at the point of sale by the manufacturer or processor in the case of domestically produced goods, and at the point of customs clearance in the case of imports. The tax rate varies by product and is based on the product's c.i.f. value plus duties; it normally ranges from 0 to 20 percent. In general, a relatively low tariff rate carries a lower IPI tax rate and a relatively high tariff rate carries a correspondingly higher IPI rate. As with value-added taxes in Europe, IPI taxes on products embodying several stages of processing can be adjusted to compensate for IPI taxes paid at each stage. The IPI is assessed on the c.i.f. value plus duty. On April 30, 2004, the GOB issued Decree #5,058 that effectively reduced the IPI rates on a selected list of products by HS classification.

Importation and commercialization of gasoline, kerosene, fuel oil, petroleum gas and ethylic alcohol are subject to additional taxes as stated in Law #10336 of December 19, 2001, as amended by Law #10636 of December 30, 2002.

Industrial Products Tax ("Imposto Sobre Produtos Industrializados", or IPI) and the Merchandise Circulation Tax ("Imposto Sobre Circulação de Mercadorias e Serviços de Qualquer Natureza", or ICMS.)

Decex Portaria #3 of January 15, 2007 applies quotas on imports of synthetic textured poliester fibers from China for a period through at least 2008.

On April 18, 2007, CONFAZ (National Council on Tax Policy) issued a "Convenio" CONFAZ/ICMS #46 that exempts a series of specific HS categories from the ICMS for wind and solar equipment. The "Convenio" identifies each product by eight digit classification in the document.

The ICMS general rate in Sao Paulo and Rio De Janeiro is 18% of the total import cost. The import cost is here defined as the CIF + (import duty+ misc. taxes of 1%) + Industrial Federal Tax (IPI).

A few Brazilian States, in mid-2004, have reduced in their ICMS rates on selected products and services at the wholesale and in some cases at the retail level. In Sao Paulo, the State Government issued Decrees #48.956-48.962 on September 21, 2004 which reduced ICMS rates on selected items. Rio Grande do Sul and Bahia also reduced rates. Previously, Rio De Janeiro and Espirito do Santos had reduced rates (sometimes increased them) on selected items and services.

The Merchandise Circulation Tax (ICMS) is a state government value-added tax applicable to both imports and domestic products. The ICMS tax on imports is assessed ad valorem on the c.i.f. value, plus duties, plus IPI. Effectively, the tax is paid only on the value-added, as the cost of the tax is generally passed on to the buyer in the price charged for the merchandise. The ICMS tax due to the state government is based on taxes collected on sales, minus those paid in purchasing raw materials and intermediate goods. The ICMS tax is levied on both intrastate and interstate transactions and is assessed on every transfer or movement of merchandise. The rate varies among states, with the predominant rate currently 18 percent. The ICMS is calculated on the c.i.f. plus duty plus IPI and is collected by customs for imports at the time of entry into Brazil.

State of Espirito Santo Tax Exemption Incentive

The State of Espirito Santo has established an import-friendly system entitled FUNDAP to defer payment of ICMS (value-added tax charged by all Brazilian States) to the State. Specifically, either an importer of record or simply a consignee located in the City of Vitoria is exempt from this tax, payable upon Customs clearance of the imported goods. Vitoria, in the State of Espirito Santo, claims to have the largest privatized port complex of Latin America.

The FUNDAP program allows for payment of ICMS up to 60 days after the product is sold to the customer. The FUNDAP program also applies to imports by air transport, as well as sea.

Under the new Customs regime imported goods in bond (or out of bond) may be held until the U.S./foreign exporter is ready to ship to its customer(s). During this entry phase, the goods are retained in a tax/duty free status. The goods can be held at the Customs Interior facilities (EADI) for up to 6 months.

The FUNDAP regulation permits the importer of record or consignee to transfer some financial benefits to the U.S./foreign export, thus imporving the exporter's cash flow and competitive position.

Briefly, the main advantages to importers using the FUNDAP system are:

(1) Exemption of the "import"ICMS tax during customs clearance.

(2) Deferred payment of the ICMS is 12% of the sales amount in inter-state sales and is otherwise due within serveral days of the sale.
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