General Tax Treatment for Imports – Part I
The applicable tax treatment for Brazilian imports includes the Import Tax (Imposto de Importação – II) as well as a number of additional levies assessed to products sold on the domestic market, with a view to ensuring goods produced in Brazil receive equal treatment.
While computing the levies assessed on imported goods may be quite complex, the SISCOMEX can automatically calculate the applicable obligations by simply entering the classification of the respective goods and their customs value.
IMPORTANT: to avoid the cumulative payment of levies, Brazilian law provides that a credit be extended upon payment of obligations at the time of import, which the importer can then use to offset equivalent levies assessed in subsequent transactions.
In practice, therefore, the levy applies only to the value added of the imported good.
Import Tax (IT)
Federal tax assessed for exclusively economic (regulatory) ends and protection. The tax applies only to products imported from abroad.
The Import Tax is selective, as it varies according to country origin of the imported goods (due to trade agreements, see Part VI, section 1) and the characteristics of the respective product. The applicable rates are set forth in the Common External Tariff (CET), the customs duty assessed by the member States of MERCOSUR. There is a specific rate for each item of the Common Nomenclature of MERCOSUR (CNM).
The tax is computed on the basis of the customs value of the imported goods. As a general rule, the customs value is calculated based on the Free on Board (FOB) value plus the corresponding freight and international insurance amounts.
The Import Tax is calculated through application of the CET rates to the respective tax base.
The rates currently set forth in the CET are all ad valorem. The Import Tax adheres to the following formula:
II = CET (%) x Customs Value
Excise Tax (Imposto sobre Produtos Industrializados – IPI)
A federal tax which also varies according to the characteristics of the respective product. As with the Import Tax, a specific rate applies (Excise Tax Index – TIPI) for each item of the Common Nomenclature of MERCOSUR (CNM).
The IPI is selectively applied as well. That is, the weight of the levy differs by virtue of the product’s strategic importance, so that the most essential products are exempted.
The obligation is calculated on the basis of the customs value of the respective product plus the amount of the Import Tax.
The tax is computed through application of the rates established in the TIPI.
IPI = TIPI (%) x (Customs Value + II)
Social Integration Program Contribution (Programa de Integração Social – PIS) and Social Security Financing Contribution (Contribuição para o Financiamento da Seguridade Social – COFINS
Federal social contributions aimed at funding social security. Since 2004, the contributions have been applied to imported products, in order to ensure domestically produced goods receive equal treatment. Imported goods are taxed at the same rate as domestic products.
Calculation of both contributions is based on the customs value.
Goods and Services Tax (Imposto sobre a Circulação de Mercadorias e Prestação de Serviços – ICMS)
A state tax on the circulation of goods on the domestic market and on interstate and inter-municipal transportation services, as well as telecommunications services. The tax also applies, in general, to imported goods, in order to ensure domestically produced goods receive equal treatment.
The tax rate differs by virtue of the importance of the product and may range from zero, for essential goods, to 25%.
Each state and the Federal District have their own ICMS legislation, including different rates and distinct tax treatment. Therefore, to estimate the total tax obligation, it is necessary to know in which state the respective good will be sold.
The ICMS is calculated by adding the customs value, the IT, IPI, PIS, COFINS, Siscomex Use Fee and ICMS itself.