No, not actually, a business has a plethora of taxes it has to pay. And they add up quickly. Sales taxes are a very small portion of taxes payable. Even income taxes, though significant, are only a part of the overall picture.
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Tax Rate For Foreign CompaniesBrazilian resident companies are subject to taxation on their worldwide income. Non-resident companies are generally taxed in Brazil through a registered subsidiary, branch, or permanent establishment, on their Brazilian-sourced income. Non-resident companies may also be subject to withholding tax (IRRF) on Brazilian-sourced income. Capital Gains Taxation
Capital gains are treated the same way as ordinary income (subject to restrictions on the offsetting of capital losses against ordinary profits in certain cases). Capital gains derived by a non-resident on an investment registered with the central bank are subject to progressive rates, as follows:
15% until BRL 5 million;
17.5% from BRL 5 million to BRL 10 million;
20% from BRL 10 million to BRL 30 million;
22.5% over BRL 30 million
a 25% rate applies if the gains are derived by a resident of a tax haven.
Main Allowable Deductions and Tax CreditsIn principle, all the expenses necessary for company activity are deductible. Start-up and pre-operational expenses may be deferred and amortised on the straight-line basis over a period of minimum five years. R&D expenditures may be deducted when incurred or deferred until termination of the project and then amortised over a period of not less than five years, at the company's choice. Losses on bad debts are tax deductible (conditions apply), exept for those arising from inter-company transactions. Charitable contributions are deductible if the recipients are registered as charitable institutions (limits apply). Expenses of group medical care and health insurance programmes for employees, as well as contributions to private supplementary pension schemes are considered deductible if supplied to all employees indiscriminately. When properly documented and substantiated, travel expenses related to business activities can be deductible. Taxes, contributions and related costs are generally deductible on an accrual basis.
Tax losses can be carried forward indefinitely. Nevertheless, the loss carry-forward is capped at 30% of taxable income (before the reduction of net operating losses). Loss carryback is not permitted.
Exemptions and reductions of corporate income tax are provided for businesses in certain less developed areas. Companies investing in less developed regions may qualify for tax exemptions and reductions. Foreign tax credit is available for resident companies on foreign income tax paid, generally limited to the amount of CIT and SCT on the foreign income.
Other Corporate TaxesThere are numerous other taxes, including:
Municipal Property Tax (IPTU): levied annually based on the fair market value of property in urban areas. Rates depend on the municipality and location of the property
Tax on Financial Operations (IOF): levied on certain financial operations, such as loans, foreign exchange operations, insurance, and securities, as well as operations with gold (as a financial asset) and foreign exchange instruments. The applicable rate will vary depending on the operation
Social Integration Programme (PIS) tax: a federal social contribution calculated as a percentage of revenue; it is levied at the rate of 1.65%
Social Security Financing Contribution (COFINS): a monthly federal social assistance contribution calculated as a percentage of revenue, is levied at the rate of 7.6%
Import Tax: rates generally vary between 10% and 20% (the maximum being 35%)
PIS and COFINS on imports: 1.65% and 7.6%, respectively, for the import of services; 2.1% and 9.65%, respectively, on importation of goods
Municipal Service Tax (ISS): 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)
Social Security Contribution (INSS): generally levied at a rate of 20% over the employees’ payroll
Severance Pay Indemnity Fund (FGTS): levied on employee’s salary at the rate of 8%
Contribution for Intervention in the Economic Domain (CIDE): levied at the rate of 10% on remittances made by corporate taxpayers for royalties and for administrative and technical services provided by non-residents.
