Brazil: Taxation In Brazil - An Overview*


Brazil's Federal Constitution of 1988 established a new Taxation System. Such a system allows for each political body at federal, state and municipal levels to generate their own tax revenue. The system is a very complex one and includes at least fifty different types of taxes.

Below is a brief description of each tax. For comprehension purposes we have divided the existing taxes into five different areas : Taxes on Importation, Taxes on Domestic Operations, Corporate Taxes, Individual Taxes, and Other Taxes. We have also included a chart summarizing the total tax burden for legal entities in Brazil.


Importation operations are subject to the following taxes:

(1) Import Duties (II)

The taxable event is the entrance of merchandise into Brazilian territory.

Rate: The applicable percentage rate varies from 0% to 70%, in accordance with the Common Foreign Tariff - TEC (Mercosul), with products classified based on the Harmonized System.

(2)Tax on Industrialized Products (IPI)

The basis for calculating the IPI for imported products is:

  • upon entry into Brazil, the value of the importation, increased by the amount of import duties; and
  • at the time of dispatch from the importer's premises, the price of the operation.

Rate: The percentage varies according to the IPI Tax Table - TIPI, with products classified based on the Harmonized System.

(3) Sales Tax (Tax on Operations relating to the Circulation of Merchandise and on the Rendering of Interstate and Intermunicipal Transport and Communications Services - ICMS)

The criteria for calculating this tax are:

  • upon customs clearance, the value which served as the basis for calculating the IPI tax, plus the value of such IPI; and
  • upon dispatch from the importer's premises, the price of the operation.


18% : normal rate adopted by the majority of the Brazilian states. In some states the rate is 17%.

12%: rate for essential products.

25%: rate for superfluous products.

(4) Addition to Freight for the renewal of the Merchant Marine (AFRMM)

This tax is calculated over the value of international maritime freight.

Rate: 25%.


The taxes imposed on internal market operations are as follows (in the order of their imposition):

(1) Tax on Industrialized Products (IPI)

The basis of calculation of the IPI on the internal market is the price of the operation (including ICMS), triggered upon the dispatch from the producer of the industrialized product.

Rate: variable depending on the type of product, in accordance with the IPI Tax Table -TIPI.

(2) Sales Tax (Tax on Operations relating to the Circulation of Merchandise and the Rendering of Interstate and Intermunicipal Transport and Communications Services - ICMS)

The basis of calculation is the value of the operation.


18%: normal intra-state rate, adopted by the majority of the Brazilian states. In some states this rate is 17%.

12%: rate for essential products.

25%: rate for superfluous products.

7% or 12%: inter-state rate on sales to other ICMS taxpayers.

NOTE: Since ICMS and IPI are imposed on the "aggregate value", in calculating the amount of tax due, the tax paid upon importation or the immediately prior operation are discounted. In other words, these taxes are similar to Value Added Taxes (VAT).


Corporate entities are subject to the following taxes:


Assessed on net profits during period on an estimated or real monthly basis.


(a) Normal:

15% - nominal rate imposed on taxable profits (Real Profit)

(b) Additional (valid only for the 1996 calendar year):

10% on Real Profit in excess of R$ 240,000


Assessment based on net profits during period on an estimated or real monthly basis.

The tax is not deductible from the its own taxable basis.


8% for non-financial institutions


Imposed on profits, income and capital gains.


Income from Financial Applications                  15%
Royalties for Patents and Trademarks                15%
Technical Assistance, Cost Sharing, Know How        15% (*)
Dividends                                            0% (*)
Income and Capital Gains of Foreign Residents       15% (*)
Interest                                            15% (*)
Payments to non-identified beneficiaries            35%

(*) Rates vary due to the existence of tax treaties to avoid double taxation between Brazil and the country where the beneficiary of the income is domiciled. Currently, Brazil has tax treaties to avoid double taxation with the following countries:

Germany          Denmark         Italy
Argentina        Ecuador         Japan
Austria          Spain           Luxembourg
Belgium          Philippines     Norway
Canada           Finland         Portugal
China            France          Netherlands
Korea            Hungary         Sweden
                 India           Czech and Slovak Republic


Assessment based on credit and exchange operations and insurance premiums.

Rates: variable by virtue of the operation; there are constant alterations due to the fact that this tax is used by the government as an instrument of economic policy.


This tax is assessed on monthly gross operational revenues.

Rate: 0.65%.


Assessment based on monthly gross invoicing of goods and services.

Rate: 2.0%.

(7) Service Tax

Assessment based on the price of services rendered.

Rates: variable from municipality to municipality. The normal rate is 5%, however, there are certain municipalities where the rates are reduced.

V. Other Taxes

Among other taxes worthy of mention are:

(1) Tax on the Transmission of "Immovable Property" - Real Estate (ITBI)

(a) The tax is imposed by the States on causa mortis transfers or on real estate donations.

Rate: variable in function of state legislation (from 1% to 6%).

(b) The tax is imposed by municipalities on onerous inter vivos transfers of property.

Rate: variable by virtue of municipal legislation (from 1% to 6%).

(2) Tax on Urban Territorial Property - Real Estate (IPTU)

The tax is assessed based on the fair market value of the immovable property.

Rate: variable by virtue of municipal legislation.


LEVEL           TAX             BASIS OF       RATE       SEE NOTES 
                              CALCULATION                     ON


          Import Duties (II) FOB value plus     "Ad       Importation 
                             international      Valorem"   Operations
                             freight and

          Industrialized      Value of          Selective   I.O./ 
          Products Tax (IPI)  Operation                     Internal

          Corporate Income    Net profits       Basic: 15%  Corporate 
          Tax (IRPJ)          during period     Additional: Taxes
                             (real monthly         10%

          Social              Net profits           8%      Corporate 
          Contribution        during period                 Taxes
          on Profits (CSL)    (real monthly 

          Income Tax at       Profits, Income    Variable   Corporate 
          Source (IRF)        and Capital                   Taxes

          Financial           Credit and         Variable   Corporate 
          Operations Tax      exchange                      Taxes
          (IOF)               operations 
                              and insurance 

          Social              Gross Sales          0.65%    Corporate 
          Integration         Revenues, plus                Taxes
          Program             financial income 

          Social Security     Billings             2.0%     Corporate 
          Financing                                         Taxes

          Additional          International        25%       I.O.
          for Renovation of   maritime
          Merchant Marine     freight


          Sales Tax (ICMS)    Price of           Variable    I.O./
                              Merchandise                    I.M.O.

          Immovable           Transfer Value     Variable    Other 
          Property            of Immovable                   Taxes
          Transfer Tax        Property
          (ITBI)              "Causa Mortis" 


          Service Tax (ISS)  Price of Service       5%      Corporate
                             (For Sao Paulo)                Taxes

          Urban Property     Fair Market        Variable    Other 
          Tax (IPTU)         Value of                       Taxes

          Immovable          Transfer Value     Variable    Other
          Property           of Immovable                   Taxes
          Transfer           Property
          Tax (ITBI)         "Inter-Vivos" 

* The content of this article is intended to provide a general guide to the subject matter. A specialist's advice should be sought in order to provide professional advice on a case to case basis which will meet specific circumstances.

For more information please contact us.

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