Brazil

7 Chapter Q&A

    • Q&A1

       Q

      Company A sold goods to company B at 1,000. In this case, how much is COFINS to be paid by Company A?

       

      Tax excluded tax amount: 1,000

      COFINS: 7.6%

      PIS: 1.6 5%

      ICMS: 18%

      * For the  calculation of  taxable standard amount of COFINS, other indirect taxes shall not be considered.
       
       
       
       

      A

       

      1. Calculation of Tax Base Value

      The taxation standard which is the source of tax calculation is the amount including COFINS, PIS, ICMS. Therefore, we calculate the rebate value of selling price 1,000 with the  indirect tax rate such as COFINS as the tax base value.

      1,0 0 0 / (1-18% - 7.6% - 1.6 5%) = 1,3 7 4.5 7

       

      2. Calculation of COFINS

      The tax base amount calculated above is multiplied by the tax rate of COFINS (7.6%) to calculate the burden amount.

      1,3 7 4.5 7 x 7.6% = 1 0 4.4 7

       

      3. Payment of COFINS

      Company A will pay COFINS calculated above by the 20th of next month.

    • Q&A2

      Q

      Company A purchased goods from company C at 600 and sold them to B company at 1,000.

      In this case, what is the tax payment amount of COFINS of Company A?

      COFINS: 7.6%

      PIS: 1.65%

      ICMS: 18%

      * For the calculation of the taxable standard amount of COFINS, no other indirect tax shall be considered.

       

       
       

       
       A.

      1. Calculation of Tax Base Value

      The taxation standard which is the source of tax calculation is the amount including COFINS, PIS, ICMS. Therefore, we calculate the taxable standard amount by rebating the selling price 1,000 with the indirect tax rate such as COFINS.

      1,000 / (1-18% - 7.6% - 1.65%) = 1,374.57

       

      2. Calculation of Received COFINS

      Calculate the contribution amount by multiplying the tax base value calculated above by the tax rate (7.6%) of COFINS.

      1,374.57 x 7.6% = 104.47

       

      3. Calculation of Purchase Tax Deduction (Credit)

      For companies that adopt the VAT method, you can deduct the COFINS you paid from the payment amount.

      600 / (1-18% - 7.6% - 1.65%) = 824.74

      824.74 x 7.6% = 62.68

       

      4. Calculation of COFINS to be paid

      The amount to be paid by Company A shall be the amount obtained by deducting the purchase tax credit amount calculated in number 3 from the received COFINS calculated in number 2. above. We will pay the amount by 20th of the following month.

      104.47 - 62.68 = 41.79

    • Q&A3

       Q

      How much is the amount of purchase tax deduction calculated when Company B, who adopts the transaction high tax method, purchases from Company A that adopts the VAT method (Value added  tax rate is 7.6%, the tax rate of the transaction tax method is 3%, and indirect taxes other than COFINS are not considered).

       

      A

      Company A will charge 7.6% to the sales price of the product and make a request to Company B. In this case, since Company B adopts the transaction tax method, therefore it  cannot deduct the purchase tax amount for COFINS it paid and  will recognize it as cost (expenses) instead.
       
       

       

    • Q&A4

       Q

      How much is the amount of purchase tax deduction to be calculated by  Company C that adopts the VAT method from  Company B that uses the transaction tax method? (Value Added  tax rate is 7.6%, the tax rate of the transaction tax method is 3%, and indirect taxes other than COFINS are not considered).

       

      A

      Company B will make a claim to Company C by adding 3% transaction tax rate to the sales price of the product. In this case, C company has to compute how much  purchase tax deduction will be made. C can deduct 7.6% assuming that it was billed based on the VAT method rather than 3% COFINS paid. COFINS paid to Company B will not be the cost (expenses) of Company C.

       
       

       

    • Q&A5

       Q

      (If automobile part Z is subject to intensive taxation at the early stage of distribution and the COFINS tax rate is 10.8%, indirect taxes other than COFINS are not taken into consideration.)

       

      1. Part Manufacturer A company imports auto parts Z and sells to wholesaler B company.

      2. Part Manufacture A case,  Company A imports Auto Part Z and sells to Automobile Manufacturer C Company.

       

      A

      1. The automobile parts traded will be items subject to intensive taxation at the early stage of distribution.

      Therefore, wholesaler B who purchases automobile parts  does not have tax obligation of COFINS. In addition, COFINS paid when purchasing is not subject to purchase tax deduction. Meanwhile, Company A will be taxed the COFINS rate of 10.8% at the time of selling the automobile part Z, and is obliged to pay this tax payment amount.
       
       
       
       
       

      2. The automobile parts to be traded are items subject to intensive taxation at the initial stage of distribution, in this case Company C is the automobile manufacturing company, and the transaction between Company A and Company C is not a transaction leading to the end of the distribution. Therefore, if Company C adopts the VAT method, COFINS paid at time of purchase from Company A can be treated as a purchase tax deduction (credit). Meanwhile, even on the side of Company A, intensive taxation at the early stage of distribution will not be imposed.

      The special tax rate is not applied and the normal COFINS tax rate of 7.6% will be taxed.

      Payment from automobile manufacturer to parts manufacturer requires additional attention to the points subject to withholding tax.
       
       
       
       
       

    • Q&A6

      Q

      Company A imported goods from B Company outside Brazil at 1,000 and sold it to Company C at 1,500. In this case, how much  COFINS is related to imports to be paid by Company A?

      COFINS: 7.6%

      PIS: 1.65%

      II (import tax): 2%

      ICMS: 18%

      IPI: 5%

      * For the  calculation of taxable standard amount of COFINS, other indirect taxes shall not be considered.
       
       
       

       
       

      A
       
       
       
       
       1. Calculation of taxable standard amount of COFINS received at the time of sale

      Tax base amount on which tax calculation is based is the amount including COFINS, PIS, ICMS. Therefore, we calculate the taxable standard amount by dividing the selling price 1,500 by the indirect tax rate such as COFINS.

      1,500 / (1 - 18% - 7.6% - 1.65%) = 2,061.86

       

      2. Calculation of Received COFINS

      The tax base amount calculated above is multiplied by the COFINS rate (7.6%) to calculate the burden amount.

      2,061.86 x 7.6% = 156.70

    • Q&A7

      Q

      Company A decided to import 1,000 services from C Company outside Brazil and remitted the necessary consideration in return. What is the amount of COFINS to be paid when importing this service?

      COFINS: 7.6%

      PI S: 1.6 5%

      Service tax (ISS): 5%

      * For  the calculation of the taxable standard amount of COFINS, we do not consider other indirect taxes.
       
       

       
       
      A
       
       
       
       

      1. Calculation of Tax Base Value

      Calculate the tax base amount based on the formula of the standard tax amount for importing services (see page 264).

      1,000 × (1 + 5%) / (1-7.6% -1.65%) = 1,157.02

       

      2. Calculate  amount of COFINS to be paid

      The tax base amount calculated above is multiplied by the COFINS tax rate (7.6%) to calculate the burden amount.

      1,157.02 x 7.6% = 87.93

       

      3. Payment of COFINS

      Company C will pay COFINS calculated above by 20th of the following month.

    • Q&A8

      Q

      We sold industrial product Z from company A's manufacturing base to company B at 1,000. What is the IPI to be paid by Company A?

      Total income tax expense amount: 1,000

      COFINS: 7.6%

      PIS: 1.65%

      ICMS: 18%

      IPI: 8%

      * For the  calculation of IPI's taxable standard amount, other indirect taxes shall not be considered.
       
       


       
      A

       
       
       

      1. Tax base value

      The taxation standard which is the source of tax calculation is the amount including indirect taxes such as COFINS, PIS, ICMS etc. (note that IPI itself is not included). Therefore, we calculate the tax base value by dividing the selling price 1,000 by the tax rate of COFINS, PIS, ICMS.

      1,000 / (1-18% - 7.6% - 1.65%) = 1,374.57

       

      2. Calculation of amount of IPI to be paid

      Calculate the taxable amount by multiplying the tax base amount calculated above by the tax rate (8%) of IPI.

      1,374.57 × 8% = 109.97

       

      3. Payment of IPI

      Company A will pay the IPI calculated above by 15th day of the following month (excluding some products).

    • Q&A9

       Q

      Company A imported industrial product Z with the amount of 1,000 from company B outside Brazil.

      How much  IPI will be paid by Company A at customs clearance?

      CIF value of imported goods: 1,000

      Import tariffs: 10%

      IPI: 5%

      * For the  calculation of IPI's taxable standard amount, other indirect taxes shall not be considered.
       
       


       
       
      A

       

       
       

      1. Tax base value

      Tax base value is calculated by multiplying the declared amount by the import duty rate.

      1,000 × (1 + 10%) = 1,100

       

      2. Tax value of IPI

      Calculate the tax amount by multiplying the tax base amount calculated above by the tax rate (5%) of IPI.

      1,100 × 5% = 55

    • Q&A10

       Q

        Company A purchased parts for production from C Company that manufactures parts at 1,000, processed at the manufacturing base of company A, and then sold industrial product Z to Company B at 1,500. What is the IPI to be paid by Company A at this time?

      COFINS: 7.6%

      PIS: 1.65%

      ICMS: 18%

      IPI: 8%

      * For the  calculation of IPI's taxable standard amount, other indirect taxes shall not be considered.

       
       

       

       
      A

       
       
       

      1. Tax base value

      The taxation standard which  is the source of tax calculation is the amount including indirect tax such as COFINS, PIS, ICMS etc. (note that IPI itself is not included). Therefore, we calculate the tax base value by dividing the selling price 1,500 by COFINS, PIS, ICMS tax rate.

      1,500 / (1-18% - 7.6% - 1.65%) = 2,061.86

       

      2. Calculation of receiving IPI

      Calculate the received IPI amount by multiplying the tax base amount calculated above by the tax rate of IPI (8%)

      To do.

      2,061.86 x 8% = 164.95

       

      3. Calculation of Purchase Tax Deduction (Credit)

      We can deduct the IPI paid at the time of purchase from the IPI amount received at the time of sale.

      1,000 / (1-18% - 7.6% - 1.65%) = 1,374.57

      1,374.57 × 8% = 109.97

       

      4. Calculate the  amount of IPI to be paid

      The amount to be paid by Company A is the amount obtained by deducting the purchase tax credit amount calculated in number 3 from the received IPI calculated in number 2 above. In principle, we will pay the amount by 15th of the following month.

      164.95 - 109.97 = 54.98

    • Q&A11

      Q

       Company A, who is a taxpayer of ICMS, sold goods amounting to 1,000 to company B. How much ICMS should A must pay from the transaction?

      * For the  calculation of the taxable standard amount of ICMS, other indirect taxes shall not be considered.

      Total income tax expense amount: 1,000

      ICMS: 18%

      COFINS: 7.6%

      PIS: 1.65%

      IPI: 10%

       
       

      A

       
       
       

      1. Calculation of Tax Base Value

      The taxation standard which  is the source of tax calculation is the amount including indirect tax such as ICMS, COFINS, PIS etc. Therefore, we calculate the rebated amount with the indirect tax rate and the  sales price 1,000 ICMS as the tax base value.

      1,000 / (1-18% - 7.6% - 1.65%) = 1,374.57

       

      2. Calculation of ICMS

      We calculate the taxable amount by multiplying the tax base value calculated above by the ICMS tax rate (18%).

      1,374.57 × 18% = 247.42

       

      3. Payment of ICMS

      Although the due date differs depending on the business content, Company A will pay the ICMS calculated above in principle on the following month.

    • Q&A12

      Q

       Manufacturer, A Company sold goods amounting to 1,000 to individual B. In this case, what is the taxable standard amount of ICMS to be paid by Company A?

      Total income tax expense amount: 1,000

      ICMS: 18%

      COFINS: 7.6%

      PIS: 1.65%

      IPI: 10%

       

      A

      In this case, since the seller of the goods is a company or business entity and the purchaser is an individual, the purchaser of the product becomes the final consumer  and not only ICMS, COFINS, PIS but also IPI is included in the tax base amount as described above. We will calculate the taxable standard value of ICMS by dividing the selling price 1,000 by these tax rates.

      1,000 / (1-18% - 7.6% - 1.65% - 10%) = 1,593.63
       
       

       

    • Q&A13

      Q

       Company A imported goods from B Company outside Brazil at 1,000. In this case, how much is the ICMS related to imports to be paid by Company A?

      Product price (CIF price): 1,000

      Customs clearance fee: 10

      COFINS: 7.6%

      PIS: 1.65%

      II (import tax): 2%

      ICMS: 18%

      IPI: 5%
       
       
       


       

      A

       

       
       

      For ICMS, the taxable standard amount is the amount including other indirect taxes except IPI. Therefore, first of all we need to calculate tariffs and COFINS.

      1. Calculation of import duties

      The taxable standard value of import tariffs will be the CIF price. Calculate by the following  formula.

      1,000 (CIF price) x 2% (tariff rate) = 20

       

      2. Estimation of IPI

      The IPI 's taxable standard amount is the sum of the CIF price plus the customs duty calculated in number 1.

      (1,000 (CIF price) + 20 (import duty amount)) × 5% (IPI tax rate) = 51

       

      3. Calculation of COFINS and PIS

      The taxation standard underlying ICMS tax calculation is the amount including indirect tax such as ICMS, COFINS, PIS etc. We calculate the amount of COFINS, PIS using the formula of detailed by 572/2005 which appeared on page 263.

      (1 + 18% × {2% + 5% × (1 + 2%)}) / (1-7.6% -1.65%) / (1-18%) = 1,360.99

      1,360.99 × 9.25% = 125.89

       

      4. Calculation of the taxable standard amount of ICMS

      It applies to the calculation formula of ICMS tax base standard amount at the time of import transaction.

    • Q&A14

      Q

      A corporation A located in Brazil received service from a Japanese law firm office B. How will the ISS be taxed when the consideration paid  for that service is 5,000?

      ※ ISS shall be 5% and no other taxes shall be incurred

       

      A

      The service that corporation A in Brazil receives from the Japanese law firm office B will be considered as imported service and subject to ISS taxation. However, since B is not registered as a taxpayer in Brazil, it cannot directly pay the ISS. In such a case, A deducts from the consideration to be paid to  B the ISS  amount computed. So, A will be transferring 4,750 to B, deducting 250, which is the service's amount 5,000 multiplied by 5%.

    • Q&A15

      Q

      Consulting Company A provided consulting services to Corporation B in Brazil. In this case, what is the amount of ISS to be paid by Company A?

      Tax-free service fee Amount: 1,000

      ISS: 5%

       

      A

      1. Calculation of Tax Base Value

      ISS shall be the tax base amount including the ISS itself as the tax base amount.

      1,000 / (1-0.05) = 1,053

       

      2. Estimating the amount of ISS

      Calculate the ISS amount by multiplying the tax base amount calculated in 1 by the tax rate of ISS.

      1,053 × 5% = 53

      Therefore, ISS to be paid by Company A will be 53.