BRAZILIAN TAX ON CIRCULATION OF GOODS

BRAZILIAN TAX ON CIRCULATION OF GOODS AND TRANSPORTATION AND COMMUNICATION SERVICE

First of all, the Brazilian Tax on Circulation of Goods and Transportation and Communication Service is a state tax, Imposto sobre Circulação de Mercadorias e Serviços in Portuguese and is abbreviated ICMS, which is levied on the circulation of goods in general. It includes a wide variety of products, such as home appliances, food, cosmetics, etc. and also on services. Therefore, this duty is applied on imports to maintain an equality between national and imported products.

THERE ARE CERTAIN EXCEPTIONS

gold for exchange purposes
services for personal use
magazines, newspapers and papers for graphic printing

Brazil has 26 states and 1 federal district, and each of the 27 states has its own law to regulate and administer this tax. In general, the fixed tax is about 17% of the custom value of the good. If the goods are transported between different states in Brazil, there will be further tax, which depends on the origin and destination state.

EXAMPLE OF THE BRAZILIAN TAX ON CIRCULATION OF GOODS AND TRANSPORTATION AND COMMUNICATION SERVICE

When you export a television set to Brazil with a custom value of R$ 3,000.00 to Santos port in Sao Paulo, where the fixed tax is 18%, the calculation should be:

IMPORTANT TERMINOLOGY

Brazilian Tax on Circulation of Goods and Transportation and Communication Service, in Portuguese: Imposto sobre Circulação de Mercadorias e Serviços – abbreviated (ICMS)

Brazilian Federal Excise Tax on Manufactured Goods, in Portuuguese: Imposto sobre Produtos Industrializados –abbreviated (IPI)

ICMS = Fixed tax % x (Custom Value + Import Duty + IPI + other taxes + custom expenses) / [1 – Fixed tax %]

CONSIDERING THE FOLLOWING CALCULATION TO THE IMPORT DUTY

Import Duty = Fixed tax x Custom Value. So it is 20% x 3,000.00 and in total it is R$ 600.00

Considering the following calculation to the Brazilian Federal Excise Tax on Manufactured Goods (IPI):

IPI = Fixed tax x (Custom Value + Import Duty)

IPI = 20% x (3,000 + 600)
IPI = 20% x 3,600
IPI = R$ 720.00

Considering the charge of the SISCOMEX use rate of R$ 214.50 (single fee to one use), the calculation of the Tax on Circulation of Goods and Transportation and Communication Service (ICMC) should be:

ICMC = 18% x (3,000 + 600 + 720 + 214.50) / [1 – 18%]
ICMC = 18% x 1,434.50 / [1 – 18%]
ICMC = 18% x 1,749.39
ICMC = R$ 314.89

ADDITIONAL INFORMATION

Furthermore, The taxable event is the customs clearance or the delivery of the goods, whichever comes first. Since clearance takes place after the registry of the Import Declaration, followed by tax analysis and eventual customs conference. In addition to that the payment of this duty occurs at the place of entry of the goods, the place where the importer is located.

This tax is charged to protect the state budget and equalise costs and prices of existing products in Brazil.

REFERENCES

For more information about Shipping Brazil vising the homepage of this website.

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