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COVID-19 update - Indirect tax, Brazil

Covid-19 is disrupting business across the world requiring tax authorities to implement rules and reliefs to support businesses through this period. We are pulling our global indirect tax resources together to create a single source of information, support and thought leadership.

What type of business is this information relevant for?

All types of business that operate in Brazil, specifically businesses from the manufacturing, sales and services sectors.

VAT/GST reliefs – tax authority announcements

Companies that adopt the SIMPLES Nacional taxation method had their federal indirect taxes (IPI, PIS and COFINS) payment delayed from April, May and June to, October, November and December 2020 respectively. ICMS (State tax on goods) and ISS (City tax on services) for SIMPLES taxpayers have been delayed from April, May and June to, July, August and September 2020 respectively.

Companies that adopt real profit or presumed profit taxation methods that have its PIS and COFINS payment due in April and May have now been deferred to July and September 2020 respectively.

Regarding Federal taxes ancillary obligations, both DCTF and EFD-Contribuições had their filing deadline delayed to July 2020.

IPI (tax on sales and import of industrialised goods) rates have been reduced to zero for certain pharmaceutical items used to combat COVID-19 until 1 October, 2020.

What ideas have you generated to support businesses?

The tax delays approved by Government may be useful for companies to manage their cashflow during this period. As indirect taxes in Brazil have strict rules, it is important to provide a deep analysis considering the bigger picture on the impact of indirect, direct and payroll taxes in cashflow. Companies which import goods that are used to combat COVID-19 should take the opportunity to import and sell with reduced tax burdens until October. The companies should analyse the adoption of measures that may increase liquidity such as seek for tax recovery services, taking advantage now that this can be done remotely.

Call to action

There are law bills pending approval by State and City authorities that may allow taxpayers to delay ICMS and ISS payments as well as other tax relief measures that should be considered. During this period the business leaders should provide customised analysis on general impacts of all taxes and labour aspects and all other measures already provided to carefully avoid potential risks. You will find more information and news regarding taxation in Brazil by clicking here.

AUTHOR

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Denise Furuno Beccare
International Tax Director, RSM Brazil
E: [email protected]