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Taxes in Brazil is an important subject to understand how market works in the country. The Brazilian National Tax System is one of the most complex in the world. Its structure is known worldwide for being extensive and complicated, both in the calculation of taxes and in its tax burden.
It is, therefore, a challenge for accounting and tax professionals to dedicate themselves to understand the functioning of it, as well as to know the laws and regulations that comprise it.
In this article we will address the functioning of the tax system, its main taxes and the existing taxation regimes in Brazil.
Taxes in the Brazilian National Tax System
There are three main types of taxes in Brazil, each intended for different areas of use. Below, we will introduce them:
• Taxes: the tax in Brazil can be used in any area, as long as there is legislation establishing this. As an example, we have the ICMS (Tax on Circulation of Goods and Services) and the IPVA (Tax on Property of Motor Vehicles). The tax is the main financier of public services.
• Social contributions: contributions have their destination defined in the legislation, and cannot be used freely. It is one of the main sources of income for the state. PIS (Social Integration Program) and COFINS (Contribution to the Financing of Social Security) are examples of contributions.
• Fees: Fees also make a large part of the State’s revenue, since they are paid when the taxpayer uses a public service. Its destination as well as the contribution is also fixed. Examples of fees are those that are paid for issuing documents and registration fees with commercial boards.
Main taxation regimes in Brazil
In addition to all the tax legislation in Brazil, companies still need to define the form of taxation of their revenue based on three types of taxation regimes aimed at companies (Simples Nacional, Presumed Profit and Real Profit).
These regimes differ in the form of calculation and payment of taxes and each has its particularity, as requirements for framing.
• Simples Nacional: small and medium-sized companies that have revenues of up to R $ 4,800,000.00 per year and are included in the list of activities provided for in Simples Nacional can join this regime.
Taxation in this regime is, in theory, simpler and milder compared to other regimes, but, even for those who fit, it is necessary to analyze several factors before actually deciding on their option.
• Presumed Profit: Scheme indicated for companies that earn up to R $ 78 million per year and that do not fit into the activities of Simples Nacional.
The form of taxation is not unified and its main characteristic is the calculation of IRPJ (Corporate Income Tax) and CSLL (Social Contribution on Net Income) based on an estimated profit.
In addition, the PIS and COFINS calculation system must be based on the cumulative system, with no possibility of calculating credits.
• Real Profit: Real Profit includes only companies with specific activities. The taxation of IRPJ and CSLL is fixed here, based on the effective profit, allowing the deduction of operating expenses.
PIS and COFINS are calculated under the non-cumulative regime, allowing the calculation of credits. Those with annual revenues above R $ 78 million are also required to fall under this regime.
Now, if you want to know more about taxes in Brazil, contact our expert’s team and talk to us!
