Consumption taxes

Nature of the tax

ICMS : Tax on operations concerning the movement of goods and on national, municipal and local transport services.

Tax rate

The ICMS is 17%:
transactions: 17% (18% in Sao Paolo);
inter-state transactions: between 7% and 12%;
imports are subject to: between 18% and 25%;
communication services: from 13% to 35%.

Reduced tax rate

A great number of deductions are applicable, each State being able to alter them.

Other consumption taxes

A tax on industrialized products (IPI) is also collected: an excise duty levied at the federal level. It applies to almost all sales and transfers of goods manufactured or imported in Brazil. The IPI rate can vary between 0% and 335%. The least taxed products are: basic foodstuffs, and the most taxed: alcohol and cigarettes.

Corporate taxes

Tax rate

Tax rate for foreign companies

Companies resident in Brazil pay taxes on their worldwide profits. Foreign companies are only subject to tax if they engage in certain sales operations involving companies or agents resident in Brazil.

Capital gains taxation

The tax rate on long term capital gains is the same as for corporate tax. Non-resident investors are subject to an obligatory deduction of 15%, rising to 25% for residents of tax havens.

Main allowable deductions and tax credit

All the expenses necessary for company activity are deductible. Other expenses can be added: for employees' lunches, training, investment in the north-east of the country or in IT equipment. On the other hand, only 20% of managers' salaries are considered to be deductible expenses.

Other corporate taxes

There are many indirect taxes:
- The PIS and COFINS, respectively allocated to an employee savings scheme and to reimbursement of social security, and levied on the gross income of the company (1.65% and 7.6%). Exports are exempt, but imports are liable.
- A supplementary tax, the ISS, is deducted by municipalities on services which are not subject to the ICMS, and is about 2 to 5% of the price of the service billed.
- A Financial Transactions Tax (IOF) to a 4% rate.
- Concerning real estate, a property tax which varies from 0.3 to 1% of the value of the property is deducted every year by the municipality, as well as a second tax of 0.03 to 20% on rural property, according to the States and the use of the land. Every buyer must pay a progressive tax of 2 to 6% on the price of the property. This federal value added tax is levied on nearly all sales and transfers of products manufactured in or imported into Brazil, depending on the degree of necessity.
- In addition, import companies pay an import duty which varies according to the type of goods, and companies which pay royalties or pay for services rendered by foreign companies are subject to a deduction of 10%.

Individual taxes

Tax rate

Allowable deductions and tax credit

Social security contributions, voluntary contributions to a private pension scheme (up to 12% of salary), professional travel expenses, pensions paid by order of a court, a deduction of 123 BRL per dependant per month, as well as BRL 2,374 in annual educational expenses. Some donations are also allowable for deductions or tax credit.

Special expatriate tax regime

No special regime for residents.

Double taxation treaties

Countries with whom a double taxation treaty have been signed

See the list of the fiscal agreements signed

Withholding taxes

Dividends: 0%, Interest: 15%/25%, Royalties: 15%/25%

Bilateral agreement

Sources of fiscal information

Tax Authorities

Administration of federal tax revenue

Other domestic resources

HSBC Bank information pages on Brazil