VAT, GST and Sales Tax in Brazil


Names of the taxes State Value-Added Tax (ICMS) Federal Value-Added Tax (IPI) Municipal Service Tax (ISS) Federal Gross Receipt Contributions (PIS-PASEP/ COFINS)
Local names Imposto sobre circulação de mercadorias e serviços (ICMS) Imposto sobre produtos industrializados (IPI) Imposto sobre serviços (ISS) Contribuição para os programas de integração social e de formação do patrimônio pfiblico (PIS-PASEP) Contribuição para o financiamento da seguridade social (COFINS)
Date introduced
ICMS 1989
IPI 1964
ISS 1968
Trading bloc membership Mercosur Member
Administered by Ministry of Finance ( Internal Revenue Service (http://www.receita.fazenda.
VAT rates
ICMS 0% to 35% (for supplies in the same state)
4%, 7% or 12% (for supplies made to a taxable person in a different state)
IPI 0% to 365% (depending on the IPI tariff table classification for the goods)
ISS 0% to 5% (depending on municipality and nature of service)
PIS-PASEP 0.65% (for taxpayers taxed under the deemed corporate income tax method of calculation, under the cumulative system) 1.65% (for taxpayers taxed under the annual actual income tax method, under the noncumulative system)
COFINS 3% (for taxpayers taxed under the deemed corporate income tax method of calculation, under the cumulative system) 7.6% (for taxpayers taxed under the annual actual income tax method, under the noncumulative system)
VAT number format nn.nnn.nnn/nnnn-nn (this ID serves in all tax matters)
ICMS, ISS, PIS-PASEP, COFINS See section headings
Thresholds Registration
ICMS, IPI and ISS Commencement of taxable activity
PIS-PASEP/COFINS Commencement of sales activity (including receipt of non-operational revenue, such as rent)
VAT return periods
ICMS Monthly
IPI Monthly
ISS Monthly (depending on the municipality where the taxpayer is located)
Recovery of VAT by non-established businesses  No

Scope of the tax

In Brazil the following types of value-added tax (VAT) are in effect:

  • State VAT (ICMS)
  • Federal VAT (IPI)
  • Municipal Service Tax (ISS)
  • Gross Receipt Contributions (PIS-PASEP and COFINS)

State VAT. The State VAT (ICMS) is levied by the individual states in Brazil. The states set the level of taxation, but the Brazilian federal government may set the minimum rate.

ICMS applies to the following transactions carried out in Brazil, even if the transaction begins abroad:

  • The circulation of goods
  • The importation of goods
  • The supply of transportation between states and between munic­ipalities
  • The supply of communication services
  • The supply of electricity

Exports of manufactured goods and raw materials are exempt from ICMS.

Federal VAT. The Federal VAT (IPI) is charged by Brazil’s federal government on national and foreign “finished goods.” “Finished goods” are goods produced as a result of an industrial process, even if the process is incomplete, partial or intermediary. IPI applies to the following taxable events:

  • The shipment of finished goods from an industrial establish­ment (or similar establishment) in Brazil
  • The customs clearance of finished goods of foreign origin

The IPI law provides for several tax incentives if the shipment of goods is related to an export, a sale to a trading company or to plant expansion plans. IPI tax incentives include the exemption of operations and the granting of tax credits.

Municipal Service Tax. The Municipal Service Tax (ISS) is a form of sales tax payable to municipalities in Brazil. It applies to the supply of any services that are not otherwise taxable by the state authorities (ICMS). The general list of taxable services is out­lined in federal law (Complementary Law), with the specific services listed in each municipal law.

A foreign company providing services fully provided outside Brazil for the benefit of a Brazilian recipient may be subject to ISS (withheld by the Brazilian entity) even if a nonresident pays for the services.

ISS is a single-stage tax with no right of recovery for ISS previ­ously paid. Consequently, regardless of status, the recipient of a service subject to ISS bears the tax paid as a cost.

In general, ISS is due to the municipality where the service pro­vider is located. One of the exceptions applies to construction services. ISS is levied on construction services in the city where the construction takes place.

Gross Receipt Contributions. The Gross Receipt Contributions (PIS-PASEP and COFINS) are social contributions based on turnover, which are levied on companies’ gross revenue, on a monthly basis. Exports are not subject to PIS-PASEP and COFINS.

Import operations (of goods and services) are also subject to PIS­PASEP and COFINS.

Who is liable

ICMS taxpayer. An ICMS taxpayer is any person or legal entity that, on a regular basis, undertakes the shipment or importation of goods, or supplies communication and interstate and intermunici­pal transport services. No turnover threshold applies. Any person or entity that intends to supply goods or services subject to ICMS must register in the roll of ICMS taxpayers before beginning activities.

Some companies and products are subject to special tax treat­ment for ICMS in which the payment is made on behalf of the whole supply chain. For example, the pharmaceutical industry pays the regular ICMS to the state where the seller is located based on the sales price and pays a complementary portion (named ICMS-ST) to the state where the customer is located based on the end consumer price list issued by this state, antici­pating the wholesaler and the retailer liabilities. Other industries, such as cosmetics and electronics, also have this special treat­ment; however, the ICMS-ST is based on a value-added margin presumed by the state government.

IPI taxpayer. An IPI taxpayer is any person or legal entity that carries out industrial processing of goods on a regular basis or imports goods from abroad. No turnover threshold applies. Any person or entity that carries on activities subject to IPI must reg­ister in the roll of IPI taxpayers before beginning activities.

ISS taxpayer. An ISS taxpayer is any person or legal entity that supplies any services listed in the ISS law on a regular basis. No turnover threshold applies. Any person or entity that carries on activities subject to ISS must register in the roll of ISS taxpayers before beginning activities.

PIS-PASEP and COFINS. A PIS and COFINS taxpayer is any company that has business activities. Contributions are levied on companies’ gross revenue on a monthly basis.

Group registration. VAT grouping is not allowed under Brazilian VAT laws.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in Brazil. A non-estab­lished business is not permitted to register for VAT in Brazil. Only entities that are established under Brazilian law may become taxpayers for the purposes of ICMS, IPI, ISS, PIS­PASEP or COFINS.

Registration procedures. Companies must register before Federal and State tax authorities if they intend to sell products on a com­mercial basis. Municipal registration is also required if the pur­pose is to provide services. Registration is mostly electronic and may take between 30 and 90 days.

Late-registration penalties. The penalty for late registration for ICMS is a fine, which may vary from 1% to 80% of the value of the transactions that occurred before registration. Penalties also relate to several IPI, PIS-PASEP, COFINS and ISS errors, includ­ing failure to register (see Section J).

Tax representatives. Tax representation is not allowed in Brazil.

Reverse charge. Reverse charge types of mechanism are present on imports of goods. The importer self-assesses IPI, PIS/ COFINS and ICMS and takes the same amount as credit to be offset with future outputs of the products.

Digital economy. Electronic sales fall into the regular indirect tax rule set. Sales are deemed to happen in the city/state where the seller is located and VAT is to be assessed and collected in that state and in the state of destination (see Section D).

Deregistration. Upon termination of activities, companies can deregister before Federal, State and Municipal tax authorities.

VAT rates

ICMS. ICMS rates vary among Brazil’s 27 states. For supplies made to a customer located in the same state as the supplier, rates typically range from 0% to 35%. The standard rate of ICMS is 17% (18% in São Paulo, Minas Gerais and Paraná and 19% in Rio de Janeiro).

Reduced rates generally apply to items of basic necessity, such as food.

The rate of ICMS that applies to imported goods is the same rate that applies to supplies of goods made within the state, except that the tax base for imported goods includes any IPI and import duty (II) payable at import. ICMS does not apply to exported goods.

The ICMS rate on a supply of goods or services made to an ICMS taxpayer resident in a different state from the state where the supplier is resident depends on where the customer is resident. The following are the rates:

  • A rate of 7% generally applies to supplies of locally produced goods (with low content of imported inputs) made to taxpayers resident in states located in the northern, northeastern and cen­tral eastern regions of Brazil and in the state of Espírito Santo.
  • A rate of 12% generally applies to supplies of domestic goods (with low content of imported inputs) made to taxpayers resi­dent in the states in the southern and southeastern regions of Brazil (except in the state of Espírito Santo).
  • A rate of 4% generally applies to supplies of imported goods or locally produced goods with low content of imported inputs made to taxpayers resident in all other states.

If the supply is made to a customer resident in another state who is not an ICMS taxpayer (including digital economy), the supply is taxed at the same rate as transactions made within the cus­tomer’s state (internal rate) and VAT is to be assessed and col­lected in two portions, as follows:

  • To the state where the seller is located in the amount equivalent to the interstate rate that would apply in a supply to a regular taxpayer
  • To the state where the customer is located in the amount equivalent to the difference between the customer’s state inter­nal rate and the interstate rate. In the first three years, this rate difference shall be shared with the state where the seller is located, as follows:
    • 2016: 40% to the customer’s state and 60% to the seller’s state
    • 2017: 60% to the customer’s state and 40% to the seller’s state
    • 2018: 80% to the customer’s state and 20% to the seller’s state

Some items, such as horticultural products and certain medi­cines, are exempt from ICMS.

IPI. IPI rates vary from a zero rate (0%) to 365%. The rate of IPI chargeable on a supply of finished goods depends on the classi­fication of the goods under the IPI Tariff Table. The table con­tains 9,728 different classification codes. The IPI Tariff Table uses the same tariff classification system as the Brazilian External Tariff Code (TEC or BTEC).

The rate of IPI varies, depending on how essential the product is considered to be. For example, the zero rate of IPI applies to essential products such as rice and wheat flour, a low rate of IPI (8%) applies to certain products, such as pipes, and the highest rate of IPI (365%) applies to “superfluous” or luxury products. Some goods are exempt from IPI. In other cases, essential prod­ucts may benefit from a reduced tax base (which reduces the effective rate of tax), or a deferral or suspension of the tax due.

ISS. The rate of ISS varies among Brazil’s 5,564 municipalities. The ISS law sets the maximum rate at 5%. The rate of ISS is generally between 2% (the lowest rate) and 5% and depends on the type of service and the municipality where it is provided.

PIS-PASEP and COFINS. The PIS-PASEP rate is 0.65% for tax­payers taxed under the deemed corporate income tax method of calculation, under the cumulative system and 1.65% for taxpay­ers taxed under the annual actual income tax method, under the noncumulative system (without credit entitlement and with credit entitlement, respectively).

The COFINS rate is 3% for taxpayers taxed under the deemed corporate income tax method of calculation, under the cumula­tive system and 7.6% for taxpayers taxed under the annual actual income tax method, under the noncumulative system.

Some companies and products are subject to special tax treatment for PIS-PASEP and COFINS, which apply different rates for some products. For example, the automotive industry pays PIS-PASEP at a rate of 2% and COFINS at a rate of 9.6% on specific prod­ucts. Other industries, such as the pharmaceutical, cosmetics and the beverage industries, also have special treatment for PIS­PASEP and COFINS.

Financial revenues are taxable at a rate of 0.65% and 4% of PIS­PASEP and COFINS, respectively.

Some essential items, such as horticultural products and wheat flour, are PIS-PASEP and COFINS zero rated.

Option to tax for exempt supplies. Not applicable. E. Time of supply

Imported goods. Goods are deemed to be supplied when they leave the seller’s facilities.

Reverse-charge services. Not applicable. Continuous supplies of services. Not applicable.

Prepayments. Prepayments are not considered taxable events in a number of cases.

Leased assets. Leased assets are not considered a sale, however certain states still demand ICMS collection on those transactions.

Recovery of VAT by taxable persons

ICMS. An ICMS taxpayer may recover input tax (that is, obtain a credit) for VAT charged on goods and services supplied to it that are subject to another taxable transaction. An ICMS taxpayer generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made. ICMS may not be recov­ered before a taxpayer begins making taxable supplies.

A valid VAT invoice or customs document must generally accom­pany a claim for input tax.

No ICMS may be claimed before a business registers for ICMS. However, a business may register for ICMS as soon as it intends to carry out taxable activities. Input tax deduction is not granted until taxable activities begin. Before making taxable supplies, the taxpayer must record purchase invoices as a “Deferred Asset” account. After taxable supplies begin, the deferred ICMS may be recovered. No time limit applies to the period between registra­tion and the beginning of an activity.

IPI. IPI taxpayers deduct IPI paid as input tax from IPI charged as output tax. The rules are similar to those for ICMS.

ISS. ISS taxpayers do not recover any ISS paid as input tax. Consequently, ISS paid is borne as a cost by all recipients of services subject to the tax.

PIS-PASEP and COFINS. PIS-PASEP and COFINS taxpayers who use the noncumulative system are entitled to calculate PIS-PASEP and COFINS credits to offset PIS-PASEP and COFINS payments. Credits are limited to certain costs.

Nondeductible input tax. For ICMS and IPI purposes, input tax may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur or general overhead costs), or on goods acquired before registration as a taxpayer.

Refunds. If the amount of input tax recoverable exceeds the amount of output tax payable, the excess is generally not refund­ed. However, the excess may be used to offset tax payments in the following months or may be transferred in certain cases to a third party.

Preregistration costs. A company must be properly registered as a taxpayer in order to acquire assets and stock or inventory. Therefore, any such acquisitions will generate tax credits (when applicable), which will be recorded in the tax books and will be offset against the debts raised on the outbound supply of the goods/services. Before a company has the status of a taxpayer, it should not be able to acquire assets or inventory.

Recovery of VAT by non-established businesses

Brazil does not refund any form of VAT incurred by businesses that are neither established nor registered for VAT in Brazil.


VAT invoices and credit notes. An ICMS, IPI or ISS taxpayer must generally provide a VAT invoice for all taxable supplies made, including exports. A VAT invoice is necessary to support a claim for input tax deduction for ICMS and IPI. Effective June 2013, companies must specify on invoices and receipts the taxes charged that are part of the total amount of the product sale price. Companies must list the amount of municipal, state and federal taxes levied for each product described on the invoice or receipt. Alternatively, such information may be displayed in plain view at the business establishment. Companies that fail to comply with this requirement will be subject to penalties, such as monetary fines, or the suspension or revocation of the license to operate.

A credit note (input invoice) must contain the same information as a VAT invoice, but it is not valid in all situations.

Proof of exports for ICMS. ICMS is not chargeable on supplies of exported goods. However, to qualify as VAT-free, exports must be supported by evidence confirming that the goods have left Brazil. Suitable evidence includes an invoice, a customs certificate of origin and an export declaration.

Foreign-currency invoices. All VAT invoices must be issued in Brazilian reals (BRL).

VAT returns and payment

ICMS. ICMS returns must be submitted for monthly periods. The VAT return consists of the following two parts:

  • A payment receipt (GARE)
  • An ICMS declaration named Digital Tax Accounting (EFD­ICMS/IPI), which lists all invoice details, including ICMS credits and debits during the period

The specific date for submission depends on the taxpayer’s busi­ness activities.

Return liabilities must be paid in Brazilian reals.

IPI. IPI is generally payable every month (depending on the type of products sold), using a payment receipt (DARF). Return liabil­ities must be paid in Brazilian reals.

For IPI, the following two different returns are required every month:

  • The Declaration for Federal Taxes and Contributions (DCTF)

ISS. ISS is due monthly. A specific payment and return form must be completed each month and must be retained for a period of five years.

ISS payments and returns are generally due monthly, but the rules differ between municipalities (Brazil has more than 5,500 municipalities). All documents must be retained for a period of five years.

PIS-PASEP and COFINS. PIS-PASEP and COFINS taxpayers must submit the DCTF to the federal tax authorities monthly. They must also submit the Digital Social Contributions Accounting (EFD-Contribuições) to the federal tax authorities on a monthly basis.

PIS-PASEP and COFINS are due monthly, using a DARF.

Electronic filing and archiving. Monthly electronic filing is required from companies where the detailed throughput of goods and services are to be reported to the authorities.

Annual returns. For specific tax books (e.g., inventory book named Block H embedded in the EFD-ICMS/IPI) there are cer­tain annual electronic filing requirements.


ICMS. For ICMS purposes, penalties are assessed for errors and omissions connected to the taxpayer’s primary obligation (payment of tax) or secondary obligations (such as proper bookkeeping). These errors include the following:

  • Late or omitted payment of tax: a fine of between 50% and 150% of the tax due
  • Entitlement to a tax credit: a fine of between 10% and 100% of the tax credit
  • Lack or fraudulent use of documents related to the shipping, transporting, receiving or warehousing of goods or inventory and to supplies of services: a fine of between 20% and 100% of the value of the transaction
  • Incorrect tax documents or invoices and records: a fine of between 1% and 10% of the value of the transaction

For other ICMS errors or misstatements, the VAT authorities calculate the appropriate fine, using the official monthly index published by the State Revenue Secretariat.

Interest is charged in addition to any fine, depending on each ICMS State Ruling. The applicable rate varies monthly.

IPI and PIS-PASEP and COFINS. The penalty for an error con­nected with IPI and PIS-PASEP and COFINS is a fine of at least 75% of the tax due.

ISS. ISS penalties may vary depending on the municipality and on the type of irregularity. In the São Paulo municipality, the fine varies from 10% to 100% of the ISS due.

Other matters

Benefits for the 2016 Olympic and Paralympic Games. The International Olympic Committee (IOC), the International Paralympic Committee (IPC) and other legal entities and indi­viduals involved in transactions regarding the 2016 Olympic and Paralympic Games will be granted tax benefits with respect to certain events occurring until 31 December 2016.

The IOC will be discharged of IPI, PIS, COFINS and certain other tax payments regarding certain events derived from its activities related to the organization and performance of the Olympic Games and Paralympic Games.

In general, companies related to or registered with the IOC are granted the suspension of IPI, PIS-Importation, COFINS­Importation, Import Tax and certain other taxes and fees with respect to the purchase of goods for use or consumption exclu­sively at the events, such as food, medical supplies, fuel, trophies, medals, promotional material, printed and nondurable goods (that last up to one year).

For durable goods and equipment, the legal act in force provides that the importation may be performed under the Special Customs Regime of Temporary Admission, which grants tempo­rary suspension of taxes. After the end of the competition, if durable goods imported through this regime are exported or donated to public-interest entities, the suspensions will turn into tax exemptions.

In order to enjoy the tax benefits, the IOC, IOC firms linked to the Court of Arbitration for Sport (CAS), the World Anti-Doping Agency (WADA), National Olympic Committees, international sports federations, businesses and transmitters, accredited media, the sponsors of the Olympic and Paralympic Games, providers of IOC services and service providers of RIO 2016 shall be estab­lished in Brazil, even if only for organizing the Olympic and Paralympic Games or one of the following activities:

  • Marketing, held in Brazil, products and services
  • Hiring individuals with or without employment

Regarding ICMS, on 5 December 2008, the National Council for Fiscal Policy (Conselho Nacional de Política Fazendária or CONFAZ) and the states signed an ICMS Agreement, which grants ICMS exemption and suspension for operations related to the International Olympic Committee if the following conditions are satisfied:

  • The operations must be discharged of at least one of the following federal taxes:
    • Import Tax
    • IPI
    • PIS
    • COFINS
  • The taxpayer must be qualified through a Permanent Technical Committee (Comissão Técnica Permanente or COTEPE) Act

All benefits granted to the IOC also apply to the IPC.