Imports are subject to several taxes and fees in Brazil, which are usually paid during the customs clearance process. There are three taxes that account for the bulk of import costs: the Import Duty (abbreviated in Portuguese as II), the Industrialized Product tax (IPI), and the Merchandise and Service Circulation tax (ICMS). In addition to these taxes, several smaller taxes and fees apply to imports. Note that most taxes are calculated on a cumulative basis.
Brazil and its Southern Common Market (Mercosul) partners, Argentina, Paraguay, and Uruguay implemented the Mercosul Common External Tariff (CET) on January 1, 1995. Each country maintains a separate exceptions list of items for tariffs.
In 1995, Brazil implemented the Mercosul Common Nomenclature, known as the Nomenclatura Comum do Mercosul (NCM), consistent with the Harmonized System (HS) for tariff classification.
Import duty (II) is a federally mandated product-specific tax levied on a CIF (Cost, Insurance, and Freight) basis, for imported goods, and is assessed during the customs clearance process. IPI is a federal tax levied on most domestic and imported manufactured products. It is assessed at the point of sale in the case of domestically produced goods, and at the point of customs clearance in the case of imports. As part of the federal government’s efforts to support local producers, IPI rates between imported and domestically produced goods within the same product category may differ. The IPI tax is a pass-along tax, assessed at each sale point, and thus not considered a cost for the importer, since the value is credited back to the importer, when sold to the end-user.
The GOB levies the IPI rate by determining how essential the product may be for the Brazilian end-user. Generally, the IPI tax rate ranges from 0-15 percent. In the case of imports, the tax is charged on the product’s CIF value plus import duty. A product’s IPI rate is directly proportional to its import tariff rate. As with value-added taxes in Europe, IPI taxes on products that pass through several stages of processing are reduced to compensate for IPI taxes paid at each stage. Brazilian exports are exempt from the IPI tax.
ICMS is a state government value-added tax applicable to both imports and domestic products. The ICMS tax on imports is assessed ad valorem on the CIF value, plus import duty, plus IPI. Although importers must pay the ICMS tax to clear the imported product through customs, it is not necessarily a cost item for the importer because the paid value represents a credit to the importer. When the product is sold to the end user, the importer debits the ICMS tax, which is included in the final price of the product and is paid by the end user.
Effectively, the tax is paid only on the value-added; the tax is generally passed on to the buyer since it is included in the price charged for the merchandise. The ICMS tax due to the state government is based upon taxes collected on sales by a company, minus the taxes paid in purchasing raw materials and intermediate goods. The ICMS tax is levied on both intrastate and interstate transactions and is assessed on every transfer or movement of merchandise. The rate varies among states but in most cases is between 17-19 percent. On interstate movements, the tax will be assessed at the rate applicable to the destination state. Some sectors of the economy, such as mining, electricity, liquid fuels and natural gas can be exempt from the ICMS tax. Most Brazilian exports are exempted.
Brazil’s customs regime allows for ex-tariff imports of foreign and U.S. manufactured goods under some circumstances. When there is no similar equipment being manufactured locally, an importer can seek import duty waivers to reduce import costs. This tax reduction is called ‘ex-tariff’ or ‘ex tarifário.’ The ex-tariff regulation consists of a temporary reduction on import duties of capital goods and information technology and telecommunications products, when there is no domestic equivalent production. To qualify, U.S. exporters or their legal representatives must submit a technical application for review. It is advised to work with a local Brazilian company with experience in the program to determine if your product could be eligible. In recent years, this program has grown with more products qualifying for it.