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.
1. General VAT information for Brazil
3. Requirements to register for VAT in Brazil
4. Invoicing requirements in Brazil
5. Penalties for non-compliance with VAT in Brazil
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% |
There are multiple taxes that organisations in Brazil need to be aware of. Here’s a simple rundown.
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.
Known as ICMS, Brazil’s state VAT is levied by individual states. Each state determines tax rates, though the tax generally applies to:
Federal VAT in Brazil, or IPI, applies to national and imported goods. Imposed by the federal government, IPI applies to taxable events that include customs clearance of goods and the dispatch of goods from a domestic industrial establishment.
Brazil’s Municipal Service Tax (ISS) is a services tax paid to municipalities in the country. It applies to services that are not covered under Brazil’s state VAT, ICMS. Generally, this tax is owed to the municipality in which the service provider operates.
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.
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).
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:
Each invoice requires specific information to be valid, and this includes:
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.
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.
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%.
A variety of items are exempt from VAT, or zero-rated, in Brazil. They include:
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.
Brazil is quite limited in its ability for businesses to reclaim VAT. Generally, the rules are:
Companies that are not registered in Brazil cannot recover VAT.
Companies only need to appoint a fiscal representative in Brazil when they have a fixed, permanent establishment.
Brazil does not have a VAT threshold, meaning organisations must register if they fulfil any taxable supplies.
There are different deadlines for the two types of VAT in Brazil:
Brazil’s VAT number, Cadastro Nacional de Pessoa Juridica (CNPJ), is a unique identification number assigned to organisations after registering for VAT.
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.
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.