TAXATION OF MICRO AND SMALL BUSINESSES IN BRAZIL

Transcription

1 TAXATION OF MICRO AND SMALL BUSINESSES IN BRAZIL

2 INTRODUCTION Since 2007, taxation of micro and small businesses in Brazil has observed the National Simplified system. This is a tax regime which, in addition to being less burdensome, simplifies calculation and payment of taxes. The National Simplified system provides for uniform application of state and municipal taxes throughout the nation and determines the limits within which states may alter provisions of the regime. Companies whose annual gross income does not exceed R$3.6 million may opt for this regime.

3 TAXES Several different taxes are provided for in Brazilian legislation, each with its own rules on incidence and calculation, different regimes and inherent obligations. The main taxes are listed below and classified by calculation base. Taxes on profit: IRPJ (Corporation Income Tax), CSLL (Social Contribution on Net Profit) Taxes on turnover: Contribution to PIS (Social Integration Program), COFINS (Social Security Financing) Taxes on revenue from production and circulation of goods: IPI (Tax on Industrialized Products), ICMS (Tax on Circulation of Goods and Services) Taxes on revenue from services: ISS (Tax on Services) Taxes on payroll: social security contribution

4 TAXES NATIONAL SIMPLIFIED SYSTEM Under the National Simplified system, all taxes are applied on gross revenue including those which in other systems are incidental on profit or payroll. In other words, calculation bases are unified. The system also provides for a uniform, monthly calculation period, and payment is made using a single slip.

5 INCIDENCE The monthly amount due under the National Simplified system is calculated by application of a rate to the gross revenue of the microcompany. This rate is variable according to gross revenue in the preceding 12 months - the higher the revenue, the higher the rate. There are three primary rate tables one for trade, one for services and the other for industry. These tables are broken down into 20 annual revenue bands, each representing an increment of R$ 180,000.

6 INCIDENCE National Simplified incidence table - Trade Gross revenue over 12 months (R$ 000) Rate IRPJ CSLL Cofins PIS/Pasep CPP ICMS Up to R$ % 0.00% 0.00% 0.00% 0.00% 2.75% 1.25% R$ R$ % 0.00% 0.00% 0.86% 0.00% 2.75% 1.86% R$ R$ % 0.27% 0.31% 0.95% 0.23% 2.75% 2.33% R$ 2,880 - R$ 3, % 0.52% 0.52% 1.57% 0.37% 4.49% 3.85% R$ 3,060 - R$ 3, % 0.53% 0.53% 1.58% 0.38% 4.52% 3.88% R$ 3,240 - R$ 3, % 0.53% 0.53% 1.60% 0.38% 4.56% 3.91% R$ 3,420 -R$ 3, % 0.54% 0.54% 1.60% 0.38% 4.60% 3.95% IRPJ = Corporate Income Tax; CSLL = Social Contribution on Net Profit; Cofins = Contribution to Social Security Financing; PIS/Pasep = Social Integration Program/Public Service Employee Fund; CPP = Employer Social Security Contribution; ICMS = Tax on Circulation of Goods and Services.

7 TAX-BURDEN COMPARISON The table below compares the tax burden among companies on the National Simplified system with companies taxed by other regimes. Gross revenue over 12 months (R$ 000) Simplified Normal regime Difference Up to R$ % 15.83% 11.83% R$ R$ % 15.83% 10.36% R$ R$ % 15.83% 8.99% R$ 2,880 - R$ 3, % 15.83% 4.51% R$ 3,060 - R$ 3, % 15.83% 4.41% R$ 3,240 - R$ 3, % 15.83% 4.32% R$ 3,420 -R$ 3, % 15.83% 4.22% Outside the Simplified National system, the tax burden is not altered between revenue bands, so the benefit is greater for companies in the initial bands.

8 STATISTICS Number of companies under the Simplified system (R$ million). Growth in period: 17.2%

9 STATISTICS Number of employees under the Simplified system (R$ million). Growth in period: 17.6%

10 STATISTICS Overall Gross Revenue (R$ Billion) Companies on Simplified system Growth in period: 47.8%

11 STATISTICS National Simplified distribution of companies by area of activity CNAE NATIONAL CLASSIFICATION OF ECONOMIC ACTIVITIES Number of Total Revenue Companies (R$ thousand) TRADE 1,749, ,059,829 TRANSFORMATION INDUSTRIES 282,500 65,210,441 ACCOMMODATION AND CATERING 270,824 29,993,151 ADMINISTRATIVE ACTIVITIES 156,275 18,155,684 TRANSPORTATION, STORAGE AND MAIL 131,723 17,044,553 CONSTRUCTION 54,519 7,758,264 INFORMATION AND COMMUNICATION 59,262 6,641,855 EDUCATION 53,536 6,640,484 OTHER ACTIVITIES 180,486 17,149,207 TOTAL 2,938, ,653,468

12 STATISTICS Distribution of revenues over Simplified National bands 2011(R$ billion) National Simplified Revenue Bands

13 CONCLUSION The National Simplified system reduces the tax burden and simplifies calculation and payment of taxes at federal, state and municipal levels. Growth of the Simplified National system, measured by number of companies or gross revenue, far exceeded the 7.4% GDP growth in the period, demonstrating that the system encourages formalization and growth among companies.