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Brazil Tax Regulations

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Author: Alannes Moura, Product Manager for Brazil, Avalara

As any company that has tried to conduct cross-border commerce with Brazil well knows, doing business in this country is challenging yet tempting, since it’s the largest economy in both South America and Latin America.

The measure under consideration is a good example of Brazil's myriad, complex tax regulations – most of which must be managed manually by businesses. The proposed restrictions are intended to appease Brazilian eCommerce merchants’ complaints that it is "too easy" for Brazilians to purchase goods from foreign ecommerce sites, and to “level the playing field” vs. large international eCommerce merchants.

 

The government is considering lowering the current $50 exemption to a symbolic amount, although what’s not mentioned yet (as far as we know) are the actual changes in rates. Note that there is precedent for this action: the Brazilian supreme court has upheld the IPI taxation of imports on the grounds of the "isonomy principle" that guarantees equal taxation for national and foreign manufacturers.

 

Naturally, the next question is, how quickly could this law become enacted? Not immediately, is the short answer.

 

The fastest way for Brazil to approve this change would be through a presidential executive order, which would still take a couple of months to go into effect, as the agencies must issue regulations regarding the changes. Moreover, any tax-rate change is subject to a 90-day adaptation period. Since this is being discussed at cabinet level, we will be paying close attention to see the outcome of these discussions.

 

Tax Regulations Brazil

 

Unlike the IPI taxation ruling (which affected comparatively fewer businesses), this action would likely be very unpopular with Brazilian consumers. Many consumer disputes have already arisen with both the Brazilian post office and Brazilian customs. At present, import taxes are collected by the carrier (in most cases, the Brazilian post office) prior to delivering the goods to the buyer.

 

The Brazilian post office has already been known to overlook the $50 exemption limit and attempt to collect taxes on shipments of lesser value. In addition, Brazilian customs arbitrates the value of goods, often ignoring invoices included in the shipment, which also causes consumer disputes. Ecommerce merchants – large and small – should continue to pay attention to this issue, as events unfold in the weeks and months to come, as it may indeed change the commercial landscape.

 

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