Brazilian taxation system and a foreigner erp v20130320

Eduardo Negri de Farias

20th March 2013

This material was prepared as an orientation to

those who intend to implement a foreigner ERP

system in Brazil.

Any mentioned legal requirement refers to

updates up to December 2012.

Page No. 2 Brazilian Taxation System

Before doing any action in the direction of implementing an foreigner

ERP solution in Brazil you must understand how is its taxation system

and specially how it works (or change frequently).

The taxation system is detail oriented and it is a real pain to

understand it and keep up with the updates.

Banking interfacing is also mentioned here, although it is not a real

problem to use the Brazilian Bank Interface protocol.

My piece of advice: hire local experts or interface your solution with a

Brazilian Taxation Software like Mastersaf, Synchro just to say two of

them.

Page No. 3 Brazilian Taxation System

Guided by the CTN Book (Código Tributário Nacional or

“National Taxation Code”)

Taxes are charged on

◦ Sales (T.O.S)

◦ Invoicing (T.O.I)

◦ Profit (T.O.P)

Electronic Bookkeeping is under regulation of a set of legal

requirements called SPED

Source – If you have any Portuguese knowledge you can check

the full law in the URL indicated on the bottom of each

applicable slide

Page No. 4 Brazilian Taxation System

Page # 5

CTN - “Brazilian Taxation Guide”

• Governmental decree of October 1966 which establishes tributes on – International Trade – tributes on importation (II) and on

exportation (IE) – Assets and Income – tributes on assets (ITR,IPVA,IPTU,

ITR, ITCD and ITBI) and on income (IR / IRPJ, CSLL ) – Production and Goods movement – tributes on production

(IPI, ISSQN, IOF) and on goods movement (ICMS)

– Tributes must be controlled as an account system (initial balance + tributes from sourcing – tributes from invoicing)

– Negative balance Tribute must be paid – Positive balance No tribute is paid; balance is used

in the next tribute calculation period

Source: http://www.planalto.gov.br/ccivil_03/leis/L5172.htm

Page # 6

Main taxes charged on raw material purchases:

– II – charged on material cost

– ICMS – charged on material cost (for imports it is calculated on material cost + II + importation expenses). It mainly varies based on a combination of good type and buyer region.

– PIS – charged on material cost

– COFINS – charged on material cost

Sources: http://www.receita.fazenda.gov.br/legislacao/leis/2004/lei10865.htm

http://www.planalto.gov.br/ccivil_03/leis/L5172.htm http://info.fazenda.sp.gov.br/NXT/gateway.dll?f=templates&fn=default.htm&vid=sefaz_tributaria:vtribut (RICMS/2000)

– IPI – charged on material cost. It mainly varies based on good classification.

Page # 7

Main taxes charged on Invoices (goods and/or services) :

– ICMS – embedded on product and service price. It mainly varies based on a combination of good type and buyer region.

– ISS – embedded on service price (it applies only to service with no goods supplied)

– PIS – charged on product and service price

– COFINS – charged on product and service price

Sources: http://www.receita.fazenda.gov.br/legislacao/leis/2004/lei10865.htm

http://www.planalto.gov.br/ccivil_03/leis/L5172.htm http://info.fazenda.sp.gov.br/NXT/gateway.dll?f=templates&fn=default.htm&vid=sefaz_tributaria:vtrib

ut (RICMS/2000) http://www.planalto.gov.br/ccivil_03/leis/LCP/Lcp116.htm

– IPI – charged on product price. It mainly varies based on a combination of good type and buyer region.

Page # 8

Main taxes on Profit according to the Brazilian Taxation System

– IRPJ – charged on net profit

Sources: http://www.planalto.gov.br/ccivil_03/leis/L9430.htm

http://www.receita.fazenda.gov.br/legislacao/leis/2004/lei10865.htm

– CSLL – charged on net profit

Page # 9

SPED - “Digital Bookkeeping Public System”

• Governmental decree of July 2007 which obligates companies to send information to all three Taxation and Finance Public Departments electronically – ECD – Digital Accountancy Bookkeeping (Livros Diário e

Razão) – FCONT – Additional information about LALUR

bookkeeping in order to attend IFRS requirements – EFD – Digital Fiscal Bookkeeping (ICMS and IPI) – EFD Contribuições - Digital Fiscal Bookkeeping (PIS and

COFINS) – NF-e – State Electronic Invoice – NFS-e – County Electronic Invoice

Source: www1.receita.fazenda.gov.br

Page # 10

NF-e - “Electronic Invoice for goods and services”

• NFS-e – “Electronic Invoice for services only” • The main requirement is that all invoice operation

must be first registered in the Financial and Taxation Department (State or County)

– The invoice is requested to the Financial and Taxation Department

– The Financial and Taxation Department creates an invoice and return its authorization code to the requester

– The requester must store this information on its environment

– The requester prints this information on a predefined layout which must be sent with the goods or services (DANFE)

Source: www1.receita.fazenda.gov.br

www.prefeitura.sp.gov.br/cidade/secretarias/financas/legislacao/index.php?p=3168 www.fazenda.sp.gov.br/nfe/legislacao/legislacao_em_vigor.asp

Page # 11

DACON - “Report of Social Contributions”

• Governmental decree of January 2004 which obligates companies to send information about PIS and COFINS tributes to Federal Taxation and Finance Department electronically – PIS and COFINS are charged on commercial

transactions – PIS is charged on company total payroll

Source: http://www.receita.fazenda.gov.br/pessoajuridica/dacon/default.htm

Page # 12

SINTEGRA - “Integrated Information System about interstate good movement”

• State Confederation decree of 1995 which obligates companies to send information about all sale and purchase transactions to State Taxation and Finance Department electronically

Source: http://www.sintegra.gov.br/

Page # 13

eLALUR - “Calculation Report of taxes and contributions charged on net profit ”

• Governmental decree of December 2009 which obligates companies to send information about IRPJ and CSLL tributes electronically to Federal Taxation and Finance Department This obligation starts on the Fiscal Year of 2013

Sources: http://www1.receita.fazenda.gov.br/outros-projetos/e-lalur.htm

http://www1.receita.fazenda.gov.br/noticias/2012/marco/noticia-02032012.htm

Page # 14

The Brazilian Banking System adopts a protocol called CNAB to exchange data between banks and companies. It covers among others:

– Electronic Receiving Document – data interchange between companies and banks in order to companies receive money from its sales

– Electronic Payment - data interchange between companies and banks in order to companies pay theirs bills

– Bank account ledger (list of all account operations)

– Tax Payment

• Every Receiving Document must have an ID called IPTE code which its calculation follows a predetermined rule (there is also a barcode ID that must be calculated)

ERP solutions cover a lot of functionalities and I

just listed those who interact with taxation and

bookkeeping (at least the most important ones).

On each module is tagged with the respective

taxation item described before.

Page No. 15 Brazilian Taxation System

Page # 16

Sales Quotation

Sales Order

Production Planning

Sourcing Discrete

Mfg

Customer Relationship Management

Project Management

Invoicing

NF-e NFS-e

Financial & Accountancy

Mgt

SPED

DACON

SPED

SINTEGRA

eLALUR

Bank Interface

SPED

CTN CTN CTN

T.O.S T.O.I T.O.P

Tax Calculation Taxation Law bookkeeping

CTN CTN CTN CTN