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Brazil is the world’s fifth largest country. With an estimated population above 217 million, it is one of the world’s most populous countries, after China, India, the United States, Indonesia, and Pakistan.

Brazil is divided into 27 federal units (26 states and the Federal District), including Brasilia as its capital. The official language of Brazil is Portuguese, and the currency is the real (BRL).




CIT = Corporate Income Tax 

SSC = Social Security Contribution  (Employee + Employer)


The Brazilian economy is considered large by almost any standard. Brazil is the eighth largest economy in the world in terms of gross domestic product (GDP) derived from purchasing power parity (PPP) calculations.

Brazil has a diversified economy with strong companies in the agricultural, commodities, industrial, and service sectors; it has one of the biggest middle classes.

Recent years have been marked by significant economic and political challenges in Brazil. However, despite being considerably affected by the COVID-19 pandemic in terms of economic indicators, its economy ended 2021 on a stronger footing than expected. GDP returned to growth in the final two months of the year, even as supply shortages were still hitting manufacturers.

Image by Gabriel Ramos



Taxation of individuals

Residents of Brazil are taxed on their worldwide income, and non-residents are taxed exclusively at source on their Brazilian-sourced income. The source of income is determined by the place where the income payer is located, irrespective of where the work is performed.

For reference, non-resident taxpayers are taxed only on Brazilian-earned income at a flat rate of 25% (no deductions are allowed). Rental income received from a Brazilian-located property is taxed at 15%. Income receive abroad by non-residents is tax exempt.

Resident taxpayers who receive income from Brazilian sources are subject to withholdings. Resident taxpayers who receive income from non-Brazilian sources (e.g. through split payroll arrangement) or from individuals (e.g. rental income) are subject to mandatory monthly tax payments on amounts not subject to withholdings.

The monthly income tax will be calculated based on progressive tax rates (in Brazilian real or BRL) ranging from 0 (for income not exceeding 1,903.98 BRL) and 27.5% for income over 4,664.68 BRL.

Social Contribution  

All employees, self-employed individuals, and employers in Brazil are required to make contributions to the social security system.

Social security contributions due by employees are payable monthly, on Brazilian-source salary income, limited to a ceiling cap each month.

Based on the Social Security Reform approved in November 2019, as of January 2021, employees will be subject to the payment of monthly social security contributions based on progressive rates from 7.5% up to 14% (resulting in a new cap amount of BRL 828.38), replacing the previous rates.

Social security contributions due by the employer are calculated considering a flat rate of 20% or 22.5%, depending on the industry's sector. In addition to the referred social security contribution, additional social charges are due by the employer, whose rate will depend on its economic activities.

Social security payable by self-employed individuals may be 5%, 11%, or 20% of the ceiling contribution salary, depending on specific conditions of the individual and of the services rendered.

Taxation of legal persons

Brazilian resident companies are taxed on worldwide income. Non-resident companies are generally taxed in Brazil through a registered subsidiary, branch, or PE, based on income generated locally. Other than that, non-resident companies can be subject to withholding tax (IRRF) on income derived from a Brazilian source.

Corporate income tax (IRPJ) is assessed at the fixed rate of 15% on annual taxable income, using either the 'actual profits' method (APM) or the 'presumed profits' method (PPM).


Corporate taxpayers are also subject to a surcharge of 10% on the annual taxable income in excess of 240,000 Brazilian reais (BRL).

Social Contribution on Net Income (CSLL)

Legal entities are generally subject to CSLL at the rate of 9% (except for some prescribed entities, such as financial institutions and private insurance companies, which are taxed at higher rates), which is not deductible for IRPJ purposes. The tax base is the profit before income tax, after some adjustments, depending on the calculation method (i.e. APM or PPM).

Value Added Tax - VAT

The Brazilian indirect taxes system is complex and has been subject to multiple changes during the past years. The text below contains general information applicable to each of the taxes herein mentioned. It is important to note that the respective legislation includes various exceptions to the general stated rules. In the case of the state VAT (ICMS), although a federal law should be followed, each state issues its own legislation, which brings certain differences when compared to the federal law.

The Brazilian indirect tax system comprises three key indirect taxes:

  • VAT on Sales and certain Services (ICMS)

  • Excise Tax (IPI), and

  • Service Tax (ISS),

which are state, federal, and municipal taxes, respectively.

VAT on Sales and Services (ICMS)

ICMS is a state tax on the circulation of merchandise, electric power, rendering of interstate and intermunicipal transportation services, and communications, even when the transaction and the rendering of services start in another country. It is not a cumulative tax, that is, the tax is only assessed on the increase in the price of the product in each part of the circulation process.

The calculation process involves a system where the taxpayer should check the amount of debits and credits related to the state VAT. In case the taxpayer upholds more debits than credits, the taxpayer will be required to pay tax on the difference between them.

In summary, the credits are calculated when the raw materials enter the taxpayer’s premises, and the debits are computed when the final product exits the establishment. Moreover, ICMS credits are not allowed for all acquisitions (e.g. use and consumptions items), and, as a rule, taxpayers are not allowed to account for credits on materials purchased that will be used as inputs for non-taxable goods (with some exceptions, such as exports).

ICMS is due on a monthly basis; however, on imports, ICMS is due on customs clearance.

The internal ICMS rates vary according to each State of Brazil, ranging, as a rule, from 17% to 20%. In the State of São Paulo, for example, ICMS is collected at an 18% rate. Certain products can attract a higher internal rate (such as 25%) or a lower internal rate (such as 12%). Different states may apply different rates according to the type of good as well as the nature of the operation.

Special rates apply to interstate sales, as shown in the chart below. A 4% rate applies on all interstate sales of imported goods.

ICMS-ST regime

In order to avoid illegal tax evasion, enhance the tax control processes, and facilitate tax collection, the legislation may appoint a single taxpayer of a product’s chain as the sole liable party, who will collect the ICMS due by all parties until the final consumer. The so-called ICMS-ST regime is imposed for certain goods as listed by each state tax legislation.

ICMS due on interstate sales of goods to final consumers

As a general rule, ICMS is collected by the state where the supplier of the goods is located. ICMS is collected by most states at internal rates ranging from 17% to 20% (some products attract a lower/higher rate). As noted above, special rates apply to interstate sales, which will be equivalent to 4%, 7%, or 12%, depending on the location of the supplier and client, as well as whether the goods are imported, have a certain content of imported inputs, or are domestically sourced.

The legislation determines that on interstate transactions with final consumers, the 4%, 7%, or 12% rates shall be applied (instead of the internal rate), and the difference between the internal and interstate rates shall be paid by the acquirer (transactions between ICMS taxpayers) or supplier (transactions involving non-ICMS taxpayers) of the goods to the consumer’s state.

Excise Tax (IPI)

This Federal excise tax is paid by manufacturers on behalf of their customers at the time of sale, either to another manufacturer who will continue the manufacturing process or to the retailer who sells to the end user.

The tax paid is stated separately on the sales invoice, as is the nature of the goods involved. Certain exemptions are given to goods considered to be of basic necessity to the country's economy. The rates are defined by the product’s tariff code (normally around 5% to 30%, but in certain cases ranging to over 300%) and are in accordance with the essentiality of each product, which generally means that essential products will attract lower tax rates.

As mentioned above, when manufactured products are sold between producers, the IPI is imposed. However, the subsequent manufacturer is allowed a credit against its IPI liability, on the amount of IPI paid to its suppliers (non-cumulative tax, similar to what happens with ICMS). Furthermore, to retailers, IPI is not recoverable and is considered as a cost of the operation.

Imports of goods are also subject to IPI taxation, while exports are not.

IPI is due on a monthly basis; however, on imports, IPI is due on customs clearance.

Municipal Service Tax (ISS)

The ISS is a municipal tax levied on the provision of services listed by Supplementary Law 116/2003. ISS is 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). The municipality to which the ISS must be collected to also changes depending on the nature of the service performed.

Concerning certain services, the municipal legislation may appoint the service recipient as the liable party, establishing its obligation to withhold ISS payment on behalf of the service provider.

Service import is also subject to ISS, to be collected by the Brazilian entity that is contracting the services from a supplier located abroad.

ISS is not levied on export of services. However, if the result of a certain service is verified in Brazil, ISS is imposed, even if the payment for such service is made by a non-resident. The definition of 'result', however, has not yet been pacified in Brazil.


Our office Rio de Janeiro can count on the support of a firm of Accountants and Auditors founded in 1999 made up of 3 Partners as well as a staff of 12 people who work daily in the areas of auditing, payroll processing, accounting, tax assistance and compliance.  

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