Import Procedures

Foreign exporters and Brazilian importers must register with the Foreign Trade Secretariat (SECEX), a branch of the Ministry of Industrial Development and Commerce (MDIC). Companies seeking to import goods into Brazil must obtain a RADAR licence. The RADAR licence grants a password to access the Brazilian Integrated Foreign Trade System (SISCOMEX). The SISCOMEX is an electronic integrated trade documentation system designed by the Brazilian Government to control and monitor the Brazilian Foreign Trade. The RADAR licence can be limited, unlimited or express depdening on the amount of imported goods. Licence applications must be submitted to tax autorities and the type of licence is determined after a review of the financial capacities of the company. Other documents are necessary for custom clearance: the commercial invoice, incoterms, bill of lading and cargo manifest ,certificate of origin, import declaration and proof of import. Depending on the product, Brazilian authorities may require more documentation.

Import costs include the Import Duty (II), the Merchandise and Service Circulation tax (ICMS) and the Brazilian Federal Value-Added Tax on Manufactured Products (IPI). Import duty is a federal product-specific tax levied on a CIF (Cost, Insurance, and Freight) basis. Rates usually vary between 10% and 35%. The IPI is a tax levied on finished products (whether foreign or domestic), resulting from some sort of industrial process. The IPI is not considered a cost for the importer, since the value is credited back to the importer. IPI rates range between 0% and 15%. The ICMS is the VAT levied by states and applies to the legal, physical, or economic circulation of goods, whether imported or not, the services of transportation and telecommunications. Although importers have to pay the ICMS to clear the imported product through Customs, it is not necessarily a cost item for the importer because the paid value represents a credit to the importer. ICMS rates vary from one state to another: in the State of São Paulo, the rate varies from 7-18 percent. Certain industries may qualify for a ICMS tax exemption.
Other minor taxes that apply to imports:

• PIS-Import and COFINS-Import are both federal contributions levied on the entrance of foreign goods into Brazilian territory.
• Freight Surcharge for Renewal of the Brazilian Merchant Marine (Adicional ao Frete para Renovação da Marinha Mercante – AFRMM) is a fee charged to support the development of merchant marine and shipping construction.

In order to attract investments, some Brazilian states grant tax incentives, consisting of total or partial reductions of ICMS on imports, which minimize tax costs of foreign trade operations.
For more information, please visit the website of Brazilian Tax Authority.

Specific Import Procedures

It is necessary to obtain a specific agreement from the ministry concerned for the following products: beverages, pharmaceutical or veterinary products, arms and munitions, as well as many cosmetics, rare metals, radioactive products or those which can damage the environment, and petroleum and all its derivatives. The Ministry of Health regulates all products that may affect the human body, including pharmaceuticals, vitamins, cosmetics and medical equipment/devices. Such product can only be imported and sold in Brazil if the foreign company establishes a local Brazilian manufacturing unit or local office, or if the foreign company appoints a Brazilian distributor who is authorised by the Brazilian authorities to import and distribute medical products.
The import of several types of meat is prohibited. The Brazilian requirements for the importation of animal products are defined by article 486 of Decree no. 9,013, dated March 29, 2017.

Distribution channels

According to USDA Foreign Agricultural Service latest report, in 2020, the food processing industry registered annual sales of R$789 billion (US$153 billion). Food represented 81% and beverages 19% of total sales. The Brazilian Supermarket Association (ABRAS) reported supermarket revenues of R$554 billion (US$107 billion) in 2020, representing 7.5% of the country’s GDP. The food retail industry sales has recorded a constantly growing trend in recent years, despite the country's uncertain economic climate.

Brazilian consumers have changed their purchasing habits: decreasing brand loyalty during the recession period and abandoning more expensive habits. Shifting demand went from premium brands – the majority is imported – to more affordable products. As consumers are not willing to pay higher prices, retailers have changed the selection of products. Within the imported categories, retailers kept well-known brands and changed the mix of products, opting for less expensive items. Supermarkets are the most important segment for imported food and beverage products. This format presents more diversity, which is the most important characteristic to affluent consumers, behind proximity. Penetration of foreign goods is considerably higher in supermarkets, ranging from 30-60%.
Although the Brazilian retailing market is not considered concentrated, the top five Brazilian companies represent 31% market share (USDA, 2020).
Among the top Brazilian retailers there are Carrefour, Grupo Pao de Acucar, Walmart (Grupo Big), Cencosud, Grupo Muffato, SDB Alimentos, Supermercados BH, Companhia Zaffari and DMA distribuidora.

Distribution market players

According to latest data provided by ABRAS (Brazilian Association of Retail Stores), in 2020 the Brazilian retail market was composed of 91,351 retailer operators. The stores were divided into five categories: convenience, neighborhood stores, supermarkets, hypermarkets, and wholesale clubs. Hypermarkets and supermarkets are the most widespread. The top 50 retailers accounted for almost 52% of overall sales in 2020, reinforcing the concentration of the market. Supermarket purchasing accounts for almost 80% of the total self-service grocery stores in the country.

In 2020, the market was divided as follows:
•    Carrefour: 13.5% market shares (Carrefour Mercado, Carrefour Bairro, Carrefour Express, Supeco, Atacadão).
•    Assai: 7.1%
•    GPA: 5.6% market shares (Pão de Açucar, Minuto Pão de Açucar, Extra, Mini Mercado, Assai) 
•    Grupo Mateus: 2.6%
•    Cencosud: 1.7% market shares (G.Barbosa, Perini, Mercantil, Bretas, Presunic)
•    Irmaos Muffato: 1.6% market shares (Super Muffato, Muffato Max)
•    Supermercados BH: 1.6% market shares
•    SDB Comercio: 1.5% market shares
•    Companhia Zaffari: 1.1% market shares
•    DMA Distribuidora: 1.0% market shares

Retail Sector Organisations

Brazilian Supermarket Association (Abrasnet)

Consumption Taxes

Nature of the Tax

ICMS (Tax on the circulation of goods and services), IPI (Tax on industrialized products), ISS (Tax on services), PIS-PASEP (Employees’ Profit Participation Program), and COFINS (Social Contribution for Social Security Financing).

Tax Rate

1. ICMS rates vary across states from 0% to 35%. The standard rate is 18% in Sao Paulo and 20% in Rio de Janeiro. Special rates apply to interstate sales (the interstate ICMS is levied exclusively by the state of destination)
2. IPI rates vary on how essential the product is considered to be, from 0% for the most essential and 300% for 'superfluous' or luxury items. The IPI tariff table contains more than 9,700 different classification codes and follows the Brazilian External Tariff Code (BTEC)
3. ISS varies across municipalities, generally from 2% to 5% (maximum rate set by law)
4. PIS-PASEP is 0.65% for taxpayers under the cumulative system and 1.65% for taxpayers under the non-cumulative system. Certain companies and products receive special tax treatment (such as the automotive industry which pays PIS-PASEP at a rate of 2% and COFINS at a rate of 9.6% on specific products)
5. COFINS: 3% (for taxable persons taxed under the deemed corporate income tax method of calculation, under the cumulative system); 7.6% (for taxable persons taxed under the annual actual income tax method, under the noncumulative system).

Consult the Guide on Brazilian VAT to find import duties and taxes which apply to your product.

Reduced Tax Rate

For ICMS, generally lower rates apply to interstate sales, with a 4%, 7%, or 12% rate (depending on the location of the supplier and client) applied on all interstate sales of imported goods.
COFINS and PIS may be reduced in certain circumstances (for example for financial revenues), and some transactions are exempt (e.g. exportation of services or assets fulfilling certain requisites).
Reduced rates generally apply to items of basic necessity (e.g. IPI applies at 0% to wheat flour and rice, 8% to pipes and 300% to luxury products; horticultural products and wheat flour are PIS-PASEP and COFINS zero-rated).

Other Consumption Taxes

A tax on industrialised products (IPI) is also collected. An excise duty levied at the federal level, it applies to almost all sales and transfers of goods manufactured or imported in Brazil. The IPI rate can vary between 0% and 300% (between 5% and 15% on average). The least taxed products are basic foodstuffs, while the most taxed are alcohol and cigarettes.

A municipal property transfer tax (ITBI) is levied on the transfer of immovable property, with different rates according to the municipality in which the property is located.

PIS and COFINS are levied on imports at rates of 1.65% and 7.6%, respectively, for the import of services; and 2.1% and 9.65%, respectively, on the importation of goods.

Corporate Taxes

Company Tax

15% - using either the "actual profits" method (APM) or the "presumed profits" method (PPM)

Tax Rate For Foreign Companies

A company is considered resident in Brazil if it has been incorporated in Brazil, and its tax domicile is where its head office is located. The Brazilian legislation has a concept of "taxable presence" (instead of the more common "permanent establishment"), according to which a non-resident company may be treated as resident if it operates in Brazil either through: (a) a fixed place of business or (b) an agent who has the power to enter into contracts in Brazil in the name of or on behalf of the non-resident company.

Capital Gains Taxation

Capital gains are treated the same way as ordinary income (subject to restrictions on the offsetting of capital losses against ordinary profits in certain cases).

Capital gains derived by a non-resident on an investment registered with the central bank are subject to progressive rates, as follows:

• 15% until BRL 5 million;
• 17.5% from BRL 5 million to BRL 10 million;
• 20% from BRL 10 million to BRL 30 million;
• 22.5% over BRL 30 million
• a 25% rate applies if the gains are derived by a resident of a tax haven.

Main Allowable Deductions and Tax Credits

In principle, all the expenses necessary for company activity are deductible. Start-up and pre-operational expenses may be deferred and amortised on a straight-line basis over a period of minimum five years. R&D expenditures may be deducted when incurred or deferred until termination of the project and then amortised over a period of not less than five years, at the company's choice. Losses on bad debts are tax-deductible (conditions apply), except for those arising from inter-company transactions. Charitable contributions are deductible if the recipients are registered as charitable institutions (limits apply). Expenses of group medical care and health insurance programmes for employees, as well as contributions to private supplementary pension schemes, are considered deductible if supplied to all employees indiscriminately. When properly documented and substantiated, travel expenses related to business activities can be deductible. Taxes, contributions and related costs are generally deductible on an accrual basis.

Brazilian corporate income tax law allows a deduction for interest on net equity (INE) paid or credited to shareholders, limited to 50% of the current year’s net profit or 50% of the company’s retained earnings, whichever is higher. The amount available for the deduction is computed by multiplying the company’s net equity balance by an official remuneration rate published by the Brazilian Central Bank.
Tax losses can be carried forward indefinitely. Nevertheless, the loss carry-forward is capped at 30% of taxable income (before the deduction of net operating losses). Loss carryback is not permitted.
Exemptions and reductions of corporate income tax are provided for businesses in certain less developed areas. Foreign tax credit is available for resident companies on foreign income tax paid, generally limited to the amount of CIT and SCT on the foreign income.

Other Corporate Taxes

There are numerous other taxes levied in Brazil, including:

• Municipal Property Tax (IPTU): levied annually based on the fair market value of property in urban areas. Rates depend on the municipality and location of the property (generally between 0.3% and 1.5%)
  
• Municipal property transfer tax (ITBI): levied on the transfer of immovable property, with rates varying according to the municipality where the property is located (progressive from 2% to 6%)
• Tax on Financial Operations (IOF): levied on certain financial operations, such as loans, foreign exchange operations, insurance, and securities, as well as operations with gold (as a financial asset) and foreign exchange instruments. The applicable rate will vary depending on the operation, with the general rate set at 0.38%. A maximum rate of 1.88% (calculated using specific methods and conditions) is applied to the principal amount of domestic loans (when the lender is a legal entity). For security transactions, rates vary based on the transaction type, ranging from 0% to a maximum daily rate of 1.5%.
  
• Social Integration Programme (PIS) tax: a federal social contribution calculated as a percentage of revenue; it is levied at the rate of 1.65% (which may be reduced under certain circumstances)
• Social Security Financing Contribution (COFINS): a monthly federal social assistance contribution calculated as a percentage of revenue, is levied at the rate of 7.6%
• Import Tax: rates generally vary between 10% and 20% (the maximum being 35%)
  
• PIS and COFINS on imports: 1.65% and 7.6% on the import of services, respectively; 2.1% and 9.65%, respectively, on the importation of goods
• Municipal Service Tax (ISS): imposed on a cumulative basis (it is not creditable), and the rates may vary between 2% and 5%, depending on the type of service (rates to be stipulated on a municipal basis)
• Social Security Contribution (INSS): generally levied at a rate of 20% over the employees’ payroll (certain entities may be eligible to calculate INSS at a range of 1% to 4.5%, applied on the company’s gross revenue rather than being calculated upon the company’s payroll)
  
• Severance Pay Indemnity Fund (FGTS): levied on an employee's salary at the rate of 8%
• Contribution for Intervention in the Economic Domain (CIDE): levied at the rate of 10% on remittances made by corporate taxpayers for royalties and for administrative and technical services provided by non-residents.

Other Domestic Resources

Federal Revenue of Brazil (RFB)

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

International tax treaties signed by Brazil

Withholding Taxes

Dividends: 0%; Interest: Interest paid to residents is subject to varying withholding tax rates: 22.5% for terms up to 180 days, 20% for terms between 181 and 360 days, 17.5% for terms between 361 and 720 days, and 15% for terms exceeding 720 days. For nonresidents, the withholding tax rate is 15%, unless reduced by a tax treaty, or 25% if the recipient resides in a tax haven; Royalties: 0% (for residents)/15% (for non-residents)/25% (for residents in tax havens).