To view our entire schedule of monthly informational webinars, go to adptaxware.com and click on the webinars tab.

Transcription

1 Can Tax Complexity and Economic Success Go Hand in Hand? A Closer Look at the Tax System in Brazil Wednesday, July 2, 2009 Copyright All rights reserved. This content may not be reproduced or repurposed without written permission from ADP Taxware. 1 Housekeeping Items To view our entire schedule of monthly informational webinars, go to adptaxware.com and click on the webinars tab. Today s webinar will last for 60 minutes, ending at 1pm eastern time. The last 10 minutes of today s program have been reserved for questions & answers. We will launch a brief survey at the conclusion of today s webinar. Those who complete the survey will be entered into a drawing for a TomTom GPS car navigation system. Jim Panagas VP Marketing, Tax & Financial Services ADP 2 1

2 CPE Credit Requirements Log in from same address that you used to register Stay for the full hour Answer 2 out of 3 polling questions Receive your certificate via in approx. 30 days. Are you applying for CPE credit for today s webinar? A. Yes B. No C. Not applicable 3 Agenda Brief historic, political, & economic considerations General concepts Brazil transaction taxes A closer look Automation possible through Taxware Enterprise product The future of taxation in Brazil Copyright All rights reserved. This content may not be reproduced or repurposed without written permission from ADP Taxware. 4 2

3 Polling Question 1 Requirements Log in from same address that you used to register Stay for the full hour Answer 2 out of 3 polling questions Receive your certificate via in approx. 30 days. What is the level of your business operations in Brazil? A. We don t have operations in Brazil. B. We have limited operations in Brazil (we just export goods and/or services there). C. We will have operations in Brazil in the near future. D. We currently have operations in Brazil. E. I don t know F. Not applicable 5 Newest Economic Success Story in the World Brazil achieved investment grade status (Standard & Poor s rating) 10 th largest economy in the world Consumer spending and disposable income doubled in the past 8 years Sao Paulo has a fleet of helicopters second in size only to Manhattan 10+ million cars powered exclusively with bio-fuel (ethanol from sugar cane) Brazil s tax burden is approximately 36% of output Twice the level of other emerging economies such as Russia, India, & China 6 3

4 Brief Historic, Political and Economic Considerations of Brazil 7 General Concepts Value Added Tax Cumulative Tax vs. Non-cumulative Tax Brazil s Administrative Division 1 Federal Jurisdiction 26 States (+ 1 Federal District) 5,560 Municipalities 8 4

5 Brazil 9 Cumulative Tax (Sales & Use 10% MANUFACTURER $ 200 No Tax WHOLESALER RETAILER $ 330 $ 300 cost $ 30 SUT Non-cumulative Tax 10% MANUFACTURER $ 200 $ 200 cost $ 20 VAT WHOLESALER RETAILER $ 330 $ 300 cost $ 30 VAT Credit $20 Debit $30 = $

6 Brazil Transaction Taxes Multi-level tax Three different transaction taxes spread across three administrative levels of government (Federal, State and Local) Two different gross-receipt taxes at the Federal level 11 IPI (Imposto sobre Produtos Industrializados) Tax on Manufactured Goods Federal-level Non-cumulative tax on the manufacture and importation of goods Doubles as excise tax Taxable base CIF* + import duty + fees for imports Rates: from 0% to 330%, mode 5% to 15% Exports: exempt *CIF = cost, insurance & freight 12 6

7 Polling Question 2 Requirements Log in from same address that you used to register Stay for the full hour Answer 2 out of 3 polling questions Receive your certificate via in approx. 30 days. For those who have any type of operations in Brazil, What is your activity? A. Sale of tangible personal property B. Sale of digital goods C. Sale of services D. Any combination of above E. None of the above F. Don t know G. Not applicable 13 ICMS (Imposto sobre a CirculaÇão de Mercadorias e ServiÇos) Tax on the Sale of Goods and Services State level (26+1 jurisdictions) Non-Cumulative tax on the sale and importation of goods and services of telecommunications, inter- State / inter-municipal transportation and utilities Taxable base: value of the transaction In the case of imports, CIF* + Import Duty + fees + IPI (tax on manufactured goods) Rates Intra-state from 7% to 37% Inter-state from 4% to 12% Exports: exempt (temporary suspension) Sourcing is origin but with dual-situsing for interstate business-to-business transactions *CIF = cost, insurance & freight 14 7

8 Inter-state Sales: What are the Ramifications? State 2 17% ICMS State 1 18% ICMS 12% Inter-state Rate RETAILER Tax Paid 12% to Wholesaler 5% self-assess at ship to WHOLESALER 15 ISS (Imposto Sobre ServiÇos) Tax on Services Municipal level Cumulative tax on services, excluding those taxable by the State VAT (ICMS) Taxable base: value of the transaction Rates 2% to 5% 10% for bingos and lotteries Exported services are exempt while imported services are taxable Sourcing Origin-based, but shifting to destination-based for certain services e.g. IT-related professional services, private surveillance, services related to immovable property, etc. 16 8

9 PIS (Programa de IntegraÇão Social) Program for Social Integration Federal level Gross-receipt tax (direct taxation disguised as indirect taxation) Non-cumulative for companies which declare their corporate taxes on actual profit regimen* with a standard rate of 1.65% Cumulative for companies which declare their corporate taxes on estimated profit regimen* with a standard rate of 0.65% * According to Brazilian GAAP (Generally Accepted Accounting Principals) 17 COFINS (ContribuiÇão para a Seguridade Social) Financial Contribution for Social Welfare Federal level Gross-receipt tax (direct taxation disguised as indirect taxation) Non-cumulative for companies which declare corporate taxes on actual profit regimen* with a standard rate of 7.6% Cumulative for companies which declare corporate taxes on estimated profit regimen* with a standard rate of 3% * According to Brazilian GAAP (Generally Accepted Accounting Principals) 18 9

10 Taxware Enterprise: Initial Support for Brazil Federal-level (IPI, PIS, COFINS) ICMS for the States of: Sao Paulo Rio de Janeiro Minas Gerais and Rio Grande do Sul ISS for the Municipalities of: Sao Paulo City the capital of the state of Sao Paulo Rio de Janeiro City, the capital of the State of Rio de Janeiro Belo Horizonte - capital of Minas Gerais Porto Alegre - capital of Rio Grande do Sul 19 Polling Question 3 Requirements Log in from same address that you used to register Stay for the full hour Answer 2 out of 3 polling questions Receive your certificate via in approx. 30 days. What is your biggest tax challenge in Brazil? A. Federal level taxes B. State level tax C. Municipal level tax D. All of the above E. Don t know F. Not applicable 20 10

11 Brazilian Taxation at a Glance Complex multi-level taxation Tax on tax across jurisdictional levels Dual processing for dual situsing in inter-state business-to-business transactions 21 Brazilian Taxation - The Future e-nota Fiscal Electronic processing with real-time approval, needed for crossing State barriers Pilot phase for large taxpayer Tax Reform 22 11

12 Final CPE Question Requirements Log in from same address that you used to register Stay for the full hour Answer 2 out of 3 polling questions Receive your certificate via in approx. 30 days. Were today s program materials relevant and did they contribute to the achievement of the learning objectives? A. Yes B. No C. Not applicable 23 Questions & Answers Camilo Martinez International Tax Manager ADP Taxware Carolina Boechat Tax Counsel ADP Taxware 24 12

13 Closing Items Reminder: CPE certificates will be ed within 30 days for those of you who met all of the requirements. Complete our on-line survey you could win a TomTom GPS car navigation system. Next Webinar: Fine- Tuning a Transaction Tax System, Wed., July 16, 12-1pm EST. 25 If you enjoy the Webinar Tour, try our Seminar Series Free, half-day seminars in major cities across the country A great way to learn how your company can meet the challenge of tax compliance For information and on-line registration, go to adptaxware.com and click on the Seminars link

14 Also check out our new Training Summit Week-long training events taking place in major cities across the country: July in Chicago October in New York City A great way to for your staff to get up to speed on Taxware Enterprise, TaxSolver, and the Sales and Use Tax System For information and on-line registration, go to adptaxware.com, click on the Training Summit logo on the front page 27 14