Brazil VAT Compliance: An Overview for Businesses
Brazil has plenty of tax rules and mandates to consider, but compliance doesn’t have to be strenuous. Knowing your organisation’s obligations and what each requires of you is vital – that’s why this page exists.
This overview guides you through the different taxes in Brazil, from state VAT to federal VAT, municipal service tax and federal social contribution. Compliance starts here.
Table of contents
1. General VAT information for Brazil
- Brazil e-invoicing
- State VAT (ICMS)
- Federal VAT (IPI)
- Municipal Service Tax (ISS
- Federal Social Contribution (PIS-PASEP and COFINS)
3. Requirements to register for VAT in Brazil
4. Invoicing requirements in Brazil
5. Penalties for non-compliance with VAT in Brazil
General VAT information for Brazil
Validation
| State VAT return | Due monthly, deadline is dependent on the type of business activities carried out |
| Federal VAT return | Due on the 15th day of the second month following the month the taxable event(s) occurred |
| VAT rates | 17% |
VAT rules in Brazil
There are multiple taxes that organisations in Brazil need to be aware of. Here’s a simple rundown.
Brazil e-invoicing
There are several types of electronic invoices in Brazil, with e-invoicing mandatory for B2G and B2B transactions. If your organisation is established in Brazil, you must issue and receive electronic invoices when dealing with businesses or public administration entities.
Learn more about Brazil e-invoicing.
State VAT (ICMS)
Known as ICMS, Brazil’s state VAT is levied by individual states. Each state determines tax rates, though the tax generally applies to:
- Imported and national goods
- Transportation services between states and municipalities
- Communication services
- Electricity supply
Federal VAT (IPI)
There are several types of electronic invoices in Brazil, with e-invoicing mandatory for B2G and B2B transactions. If your organisation is established in Brazil, you must issue and receive electronic invoices when dealing with businesses or public administration entities.
Learn more about Brazil e-invoicing.
Municipal Service Tax (ISS)
Known as ICMS, Brazil’s state VAT is levied by individual states. Each state determines tax rates, though the tax generally applies to:
- Imported and national goods
- Transportation services between states and municipalities
- Communication services
- Electricity supply
Federal Social Contribution (PIS-PASEP and COFINS)
PIS-PASEP and COFINS are federal social contributions levied on the monthly gross revenue of organisations. While exports are exempt from these taxes, imports fall under the rules – though tax rates vary based on each organisation’s activities.
Requirements to register for VAT in Brazil
For non-residents of Brazil, the requirements for VAT registration are simple.
Non-resident businesses cannot register for VAT in Brazil without a permanent establishment in the country, and all supplies of goods or services meet the tax threshold for at least two of the four VAT types – meaning registration is necessary for any organisation doing business in Brazil.
However, the country’s tax authorities have yet to implement VAT on cross-border supplies by foreign organisations to consumers who have not registered for VAT (B2C).
Invoicing requirements in Brazil
Generally, any product or service sale must be accompanied by an invoice. Brazil requires businesses to register in a state by joining the National Registry of Legal Entities (CNPJ).
There are multiple types of e-invoices in Brazil, including:
- Electronic invoice (NF-e) – for providing goods of service
- Electronic service invoice (NFS-e) – for providing services
- Electronic consumer invoice (NFC-e) – for B2C transactions
Each invoice requires specific information to be valid, and this includes:
- CNPJ number
- Address of both the issuer and recipient
- Product code, description and quantity
- Unit value and tax details
- Valid digital signature
In Brazil, an electronic invoice must be presented in structured XML format and validated by the Brazilian tax authorities before it is issued to the buyer.
Penalties for non-compliance with VAT in Brazil
Failing to comply with Brazil’s VAT rules can be costly for taxpayers. There is a dramatic range for fines, ranging from 1% to 150% – though the regular penalty cost is 75% of the tax due to the authorities.
FAQ
What is the VAT rate in Brazil?
The standard VAT rate in Brazil is 17%, though it raises to 25% for specific goods or services. There are also reduced rates of 12% and 7%.
What items are VAT exempt in Brazil?
A variety of items are exempt from VAT, or zero-rated, in Brazil. They include:
- Any item sent abroad by a Brazilian supplier
- Eggs, fruit and vegetables
- Medical supplies
- Equipment and Supplies for surgery
- Wheelchairs
- Prosthetics
Can I withhold VAT in Brazil?
In Brazil, as a rule, for example, there are assumptions of withholding taxes, in the case of the Tax on the Movement of Goods and Services (ICMS), provision in ICMS Agreement 142/2018 and, as for the Tax on Services (ISS), provision in article 6, Complementary Law 116/2003.
How to reclaim VAT in Brazil?
Brazil is quite limited in its ability for businesses to reclaim VAT. Generally, the rules are:
- For ICMS (state VAT), organisations can only reclaim VAT that is recorded on inputs which apply to commercial goods
- For IPI (federal VAT), only importers and industrial entities can recover VAT via credits
Can non-residents recover VAT in Brazil?
Companies that are not registered in Brazil cannot recover VAT.
Do I need a fiscal representative in Brazil?
Companies only need to appoint a fiscal representative in Brazil when they have a fixed, permanent establishment.
What is the VAT threshold in Brazil?
Brazil does not have a VAT threshold, meaning organisations must register if they fulfil any taxable supplies.
What are the submission and payment deadlines in Brazil for VAT?
There are different deadlines for the two types of VAT in Brazil:
- ICMS: These returns are due monthly, with the deadline dependent on the type of business activities carried out
- IPI: Returns must be submitted monthly through the DCTF declaration, due by the 15th day of the second month following the month the taxable event(s) occurred
What is a VAT number in Brazil?
Brazil’s VAT number, Cadastro Nacional de Pessoa Juridica (CNPJ), is a unique identification number assigned to organisations after registering for VAT.
When does VAT liability apply in Brazil?
There is no threshold for VAT liability in Brazil. If a business supplies goods or services that are subject to one or more of the country’s taxes, then it must register for VAT.
Solutions for VAT compliance in Brazil
With the numerous taxes in Brazil, compliance can be complicated. Sovos is your ideal compliance partner – not just now, but as the country’s tax rules develop over time.
We combine local tax expertise with global solutions, ensuring compliance wherever you do business. This allows you to focus on what matters.
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