Brazilian Taxes

Tax / fiscal terms

Tribute (pt: Tributo) | It is an obligation to pay, created by law, imposed on taxpayers with the aim of managing the development of the State, since we live in society
- The Brazilian Federal Constitution classifies taxes into a list of 5 elements:
  - Taxes
  - Fees
  - Improvement Contributions
  - Compulsory Loans
  - Special Contributions
Fee (pt: Taxa) | It is a tax charged to a public administration activity that is directly or indirectly linked to the taxpayer, for the provision of a service that is paid for by the State
- The fee will be found in most public services, such as:
  - Court Fees
  - Traffic Fines (as this is a police power)
  - Fire fees
  - Urban Waste Collection Fees
Tax (pt: Imposto) | Unlike other tributes, such as fees and contributions, this is an unlinked tax, that is, it is due by the taxpayer regardless of any consideration from the State
- It is considered the most important tribute in the country. Among the main taxes in Brazil, we can mention:
  - ICMS, IPI, ISS, IR and other

Classification

Direct (pt: Diretos) | Direct taxes are those that directly affect the income, assets and economic activities of individuals and companies, such as Income Tax, IPVA, ITR, IPTU, ISS, among others
Indirect (pt: Indiretos) | Indirect taxes are those that are levied on goods, services and commercial transactions, reflecting on the final price of products and services, such as ICMS, IPI, PIS, COFINS, among others
Additional (pt: Adicional) | When the taxable event is represented by the payment of another tax. As an example, we have the additional 10% of the Income Tax, Legal Entity
Fixed (pt: Fixo) | When determined in a specific amount, regardless of calculations. For example, the ISS for independent professionals
Proportional (pt: Proporcional) | When established as a single percentage incident on the value of the taxable material, the tax amount increases only when the basic value for calculation increases (ICMS, IPI and ISS, when incident on revenue)
Progressive (pt: Progressivo) | When the rates are set at variable and increasing percentages, according to the increase in the value of the taxable matter - for example, Personal Income Tax
Regressive (pt: Regressivo) | Taxes are levied in equal percentages on taxpayers, without taking into account the economic capacity of the person who will bear the tax burden. This makes them “regressive”, that is, taxpayers with lower economic conditions end up paying (proportionally) a larger share of taxes on their income. ICMS, IPI, PIS and COFINS are examples of regressive taxes (at the same time, they are also classified as indirect)
Real (pt: Real) | This is a tax based on real (physical) assets, known as “Taxes on Assets”, such as IPTU, IPVA and ITR
Personal (pt: Pessoal) | Personal is the tax that establishes tax differences based on conditions inherent to the taxpayer. Taxes are levied according to the taxpayer’s economic capacity (Income Tax for individuals and legal entities)
Extrafiscal (pt: Extrafiscal) | Tax that aims not only at collecting revenue, but also at correcting anomalies. Example: Export Tax
Parafiscal (pt: Parafiscal) | Contribution charged by an autarchy, parastatal, professional or social bodies, to cover their autonomous financing. Example: annual fee for CRC, CREA, OAB, etc

Taxation

II - Import Tax
- In Portuguese: Imposto de Importacao
- Level: Federal
- Levy: It is levied on all imported products in two different ways: goods worth up to US$100 and between US$100 and US$3,000
IE - Export Tax
- In Portuguese: Imposto de Exportacao
- Level: Federal
- Levy: It is levied on products produced in Brazil and sent to other countries
IPI - Tax on Industrialized Products
- In Portuguese: Imposto sobre Produtos Industrializados
- Level: Federal
- Levy: It is levied on products that have undergone some industrialization process, whether imported or not; it is paid by importers and business owners
IOF - Tax on Financial Transactions
- In Portuguese: Imposto sobre Operacoes Financeiras
- Level: Federal
- Levy: It is levied on credit, exchange or insurance transactions, for both individuals and legal entities
IRPJ - Corporate Income Tax
- In Portuguese: Imposto de Renda Pessoa Juridica
- Level: Federal
- Levy: Monthly, quarterly or annual tax, depending on the tax regime, levied on companies on their gross income
IRPF - Individual Income Tax
- In Portuguese: Imposto de Renda Pessoa Fisica
- Level: Federal
- Levy: Tax required from taxpayers with earnings above the ceiling established by the Federal Revenue Service
ITR - Tax on Rural Land Property
- In Portuguese: Imposto sobre a Propriedade Territorial Rural
- Level: Federal
- Levy: Annual tax levied on rural property owners, whether individuals or legal entities
COFINS - Contribution for the Financing of Social Security
- In Portuguese: Contribuicao para o Financiamento da Seguridade Social
- Level: Federal
- Levy: Annual tax levied on almost all companies to finance programs such as social security
CIDE - Contribution for Intervention in the Economic Domain
- In Portuguese: Contribuicao de Intervencao no Dominio Economico
- Level: Federal
- Levy: Tax added to oil, natural gas and their derivatives; the rate is based on the cubic meter of fuel
CSLL - Social Contribution on Net Income
- In Portuguese: Contribuicao Social sobre o Lucro Liquido
- Level: Federal
- Levy: Tax levied on the company’s net income as set forth in the IRPJ
INSS - National Institute of National Security
- In Portuguese: Instituto Nacional da Seguridade Nacional
- Level: Federal
- Levy: Tax collected from both individuals and legal entities to fund social security, among other areas
FGTS - Service Time Guarantee Fund
- In Portuguese: Fundo de Garantia do Tempo de Servico
- Level: Federal
- Levy: Tax deducted from workers’ salaries; it can be withdrawn by them in cases provided for by law, such as unfair dismissals
PIS/PASEP - Social Integration Program / Public Servant Asset Formation Program
- In Portuguese: Programa de Integracao Social / Programa de Formacao do Patrimonio do Servidor Publico
- Level: Federal
- Levy: Tax collected to fund bonuses and unemployment insurance for workers in state-owned companies
ICMS - Tax on the Circulation of Goods and Services
- In Portuguese: Imposto sobre Circulacao de Mercadorias e Servicos
- Level: State
- Levy: Tax collected by companies and passed on to consumers when they purchase products and services sold in Brazil
ITCMD - Tax on Transfers of Property by Death and Donation
- In Portuguese: Imposto sobre Transmissao Causa Mortis e Doacao
- Level: State
- Levy: Tax levied on inheritances and donations and goes directly to the state coffers
IPVA - Tax on Ownership of Motor Vehicles
- In Portuguese: Imposto sobre a Propriedade de Veiculos Automotores
- Level: State
- Levy: Tax collected from owners of motor vehicles; half of the amount collected goes to the state and the other part goes to city governments, which decide how to manage the money
ITBI - Tax on Transfer of Assets Inter Vivos
- In Portuguese: Imposto sobre Transmissao de Bens Inter Vivos
- Level: Municipal
- Levy: Tax paid by the buyer of a property when transferring assets of this nature
ISS - Tax on Services
- In Portuguese: Imposto sobre Servicos
- Level: Municipal
- Levy: Tax collected from companies and self-employed professionals
IPTU - Tax on Urban Land and Real Estate Property
- In Portuguese: Imposto sobre a Propriedade Predial e Territorial Urbana
- Level: Municipal
- Levy: Tax collected from property owners or tenants

Complexity of PIS and COFINS

Some tax scholars say that PIS/COFINS can be considered Direct Taxes due to all the conceptual notions illustrated below.

But, in fact, PIS/COFINS are widely considered Indirect Taxes by Brazilian Authorities, Companies and by the vast majority of tax experts (even by SAP).

The complexity of those taxes lies in conceptual notions of:

Direct / Indirect Taxes
Cumulativeness
Legal Taxpayer
Actual taxpayer
General Economic Impact
Specific Economic Impact
Taxable Event