Overview Brazil

Brazil

Those who are doing business in Brazil are familiar with the term „lava jato“ – or car wash. The term has been coined for a series of corruption investigations surrounding the state controlled oil company Petrobras – targeting both big business and high politics. While the intensity of both investigations and sanctions is new to Brazil, the problem of deep-rooted corruption is not. Last year Brazil ranked 96 out of Transparency International`s 180 countries evaluated in its Corruption Perception Index, right next to Colombia and Peru.

In order to fight the high level of corruption, Brazil has advanced to become one of the administratively and bureaucratically most regulated countries in the world. These regulations are time and asset consuming wherefore they inhibit Brazil`s economic growth potential. In order to alleviate those negative side effects, one of the measures comprises of an electronic bookkeeping system SPED (Sistema Público de Escrituração Digital) which significantly reduces the paper-based reporting activities which makes the issuing, sending, receiving and archiving of invoices for audits much easier.

 

e-Invoicing

In Brazil using the e-Invoice Nota Fiscal Eletrônica (NF-e) is mandatory for all companies. The responsible tax authority is the SEFAZ (Secretaria de Fazenda) which cooperates with state institutions in enforcing and monitoring tax regulations. The NF-e is only valid if it carries the electronic signature of the sender as well as the verification of the SEFAZ in terms of an authorization barcode (DANF-e). These verification mechanisms need to be established prior to sending the goods. There are respective e-invoices for services and transports as well:

NFe for goods
No goods must be delivered without the printed invoice including the authorization codes (DANFe).

NFe-s for services
The service provider sends the invoice to the municipality which authorizes it. Afterwards, the buyer can download the invoice directly from the city`s website.

CTe for transports
When using third party transporting services the invoice needs to be validated by the buyer using his backend system. The buyer needs to integrate the invoice in his monthly reports to the government. The document CTe 3.0 has to be carried along during transportation.

An extension of SPED is Bloco K which includes details on the usage of raw materials, inventory and storage movements of holdings. Starting in 2019, it is mandatory for companies to electronically submit the Bloco K.

 

Process (for goods)

Registration and e-signature
The supplier registers with the government to receive authentication certificates. The government then issues a personal key to be used to generate an electronic signature. The supplier generates the relevant tax data via his ERP System as a XML file that is validated through his electronic signature. The signed file is then send to the SEFAZ.

Validation
The SEFAZ validates the file in real time using an authorization code. This code needs to be transferred back into the XML file or the ERP system prior to delivering the goods.

Submission
The validated XML invoice (Digitally Authorizes Nota Fiscal Eletronica, DANF-e) will be attached to the goods as a printed barcode. Additionally, the invoice will be delivered electronically or through a communication system.

Real time Control & invoice confirmation by the Client
The goods can be shipped. A real time control is possible by scanning the DANF-e. After receiving the delivery, the buyer has to confirm the NF-e to the SEFAZ while integrating the authorization codes into the monthly accounting report. These two levels of validation are supposed to prevent tax evasion.

Invoice Finalization
The process is being finalized by the SEFAZ sending a confirmation for the delivered goods.

 

Compliance

Brazil has one of the world`s hardest anti-corruption laws which not only blame companies for corruption incidents that they are directly responsible for but also if they have not implemented adequate prevention measures.

The new legislative regulations are in line with Brazil`s international commitments:

The special feature of Brazil`s anti-corruption law is its reach: it does not only cover actions of national companies vis-á-vis national authorities but also vis-á-vis public administrations of third party states including international organizations and even diplomatic missions.
Additionally, both legal entities and natural entities can be prosecuted. This is even the case if they are not directly involved in the case but if the illicit behavior is conducted by suppliers, service providers or intermediaries.
At the same time, the law obligates companies to establish an effective compliance program which leads to a reduces risk of liability. The Ministry for Transparency, Supervision and Control (CGU) is in charge of overseeing the compliance regulations.
While there is no legally binding compliance program model there are specific criteria that are being used to evaluate its adequacy:

• „Tone of the Top“ – commitment of top management
• Creation of Code of Conduct/Ethics and guidelines
• Effectivity of the program
• Periodic training, risk analysis and monitoring
• Internal controls
• Independence of the Compliance Officer
• Disciplinary measures

If a country is being evaluated or investigated it has to issue a profile and conformity report. The former details the type, set-up and activities of the company. The latter describes the company`s compliance program.

 

Criterium Brazil
Legal basis Anti-Corruption  12,846 (2013)
Compliance program duty? Yes, but a specific model is only required in the state of Rio de Janeiro if the company has contracts with state institutions
Standards ·         Senior-Management Commitment

·         Risk analysis

·         Compliance program

·         Due diligence

·         Monitoring

·         Transparency

·         Reporting and disciplinary measures

·         Periodic training based on Code of Conduct/Ethics

Compliance program as mitigating factor? Yes, also in case of self-denunciation, cooperation with the institutions and payment of damages à still considered the toughest anti-corruption law worldwide
Sanctions Up to 10% of the contract`s value

A more comprehensive article on the legal requirements and potential sanctions with view to compliance can be found here.

Tax Law & Taxes

The Brazilian tax is not considered the most complicated worldwide for nothing. Currently, there are 27 tax types which are being levied on the federal, state and municipal level. The most relevant ones are subsumed in the following table:

 

Tax type Tax base Rate
Federal Level
Income Tax

(Imposto de Renda da Pessoa Física, IRPF)

Total income including capital gains income: 0-27,5%

capital gains: 15%

CIT

(Imposto de Renda da Pessoa Juridica, IRPJ)

Actual or presumed gains* 15%

25% starting at monthly gains over 20.000 Reais

Social Security Tax (Contribuição Social sobre o Lucro Líquido, CSLL) Net profit companies: 9%

financial institutions: 15%

Social Integration Tax (Programa de Integração Social, PIS) und die Sozialfinanzierungsabgabe (Contribuição para o Financiamento da Seguridade Social, COFINS) Gross income In total circa 9,25%
Industrial Product Tax

(Imposto sobre Produtos Industrializados – IPI)

Added value of further processing and import of goods 0% up to 300% depending on product, on average 20%
Import Tax,

Export Tax,

Capital Transfer Tax (Imposto sobre Operações de Crédito, Câmbio e Seguro, ou Relativas a Títulos ou Valores Mobiliários – IOF)

Import, Export, Capital Transfer 0-25%
State Level
Goods and Services Circulation Tax

(Imposto sobre Operações relativas a Circulação de Mercadorias e sobre Prestações de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação – ICMS)

18%
Vehicle Tax (IPVA) vehicles Depending on vehicle
Inheritance and Gift Tax (ITCMD) Inheritance and gifting Depending on value
Municipal Level
Service Tax (ISS) Services 2-5%
Property Transfer Tax (ITBI) Real estate purchase Depending on value and location
Property Tax for Municipal real estate (IPTU) Municipal real estate Depending on value and location

*”A company can choose whether their tax base is their actual profit (Lucro Real) or their presumed profit (Lucro Presumido). For judicial persons whose previous year`s profits exceeded 78 million Reais and that generate profits from foreign subsidiaries (excluding profits from exports), that engage in financial services or factoring activities or receive tax relief or tax exemptions it is mandatory to use their actual profits as their tax base.“ (GTAI, 2017).

 

Not yet implemented but already planned is a new tax on big fortunes (Imposto sobre Grandes Fortunas, IGF). Furthermore, the double taxation agreement with Germany has been suspended in 2005.

Tax Reform

Currently, companies in Brazil use up to 32% of their assets on compliance with the 27 different and complicated tax laws. In order to improve Brazil`s economic climate, a tax reform has been proposed in 2017 which includes the following items:

• A centralized tax system is supposed to enable a joined use of information for the different tax institutions in order to reduce compliance costs and improve effectivity
• Cancellation of regional declaration duty in favor of a common, centralized tax system
• Establishment of a centralized tax system for electronic services
• Harmonized compliance with custom-related tax duties

 

An explanation of all relevant technical and tax terms is available here.

 

 

 

Wir benutzen Cookies um die Nutzerfreundlichkeit der Webseite zu verbessen. Durch Deinen Besuch stimmst Du dem zu.