UK Trade & Investment
Export Support to
Companies in the Global
Sports Market
Case Study - Brazil
27th March 2014
So…What´s going on in Brazil?
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©2013 Deloitte Touche Tohmatsu
Entering the Brazilian market
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Before entering the Brazilian market - be aware of various import duties and indirect taxes. This can significantly increases the cost
of exports to Brazil and can erode your profit margins if you don’t take care.
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Beware of local business partners telling you that costs and corners can be cut, for example through the use of customs brokers
(despachantes) – they cannot be
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If expanding organically into the market note that it is impractical to operate through a branch; always register a limited company.
No lower limit – it is compulsory to register in order to trade.
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Setting up a company in Brazil is a bureaucratic process; however it is not difficult if you know the ropes.
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If acquiring a Brazilian target, it’s important to understand Brazilian business culture in negotiating with vendors, and perform Due
Diligence.
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Multiple taxes levied at Federal, State and Municipal level. A variety of indirect taxes and importation duties apply. Rates vary
between states and municipalities.
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Effective up-front supply chain planning can be critical, from both a tax and labour perspective. For example, imports can be routed
in a tax and cost-efficient way through different Brazilian cities/states that are not obvious to the uninitiated. Doing things in Brazil
is almost always cheaper for tax than importing.
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Brazil was one of the first countries to adopt online filing, not just tax returns but all invoices. Companies must therefore review tax
returns to ensure that all entries can reconciles to other electronically filed data.
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Accurate compliance is important; tax inspectors can be aggressive and informal negotiations unusual. Litigation is rife.
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Penalties for under declared/late taxes relatively severe – between 20% and 75% of tax due and are rarely waived, although there
are occasional amnesties.
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Small companies (turnover less than R$72M) can adopt the simple “Deemed Profit” regime – tax is based on percentage of
turnover regardless of profitability and complexities such as transfer pricing can be avoided.
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Brazilian States offer significant tax incentives, such as regional grants, R&D credits and tax exemptions. There are often underused through lack of awareness by foreign multinationals generally because the State authorities do no widely publicise their
existence.
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©2013 Deloitte Touche Tohmatsu
Brazilian tax: Perception & Reality
I heard that…
Brazil has a very complicated tax system.
The truth is….
Brazil has a very complicated tax system.
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©2013 Deloitte Touche Tohmatsu
Brazilian Tax :Overview of Tax Rates
Key taxes in Brazil
Description
Rate
IRPJ/CSLL
Corporate income tax - consists of 2 separate levies with a combined effective rate of
34% (24% on income up to BRL 240,000)
34%
IPI
Federal value added tax on goods – rates vary by type of product from 0% to 300%
but the average is 15%
Average 15%
IOF
Financial operations tax on remittances outside Brazil and issue of shares and/or debt.
(NB 6% if loan is for less than one year)
0.38%
COFINS
Social contribution on gross revenue (generally creditable)
3% (non-creditable) for companies on the presumed profit basis
7.6%
PIS
Social Integration Program on gross revenue (generally creditable)
0.65% (non-creditable) for companies on the presumed profit basis
1.65%
IRRF
Withholding tax applied to most cash flows outside Brazil (rate is 25% if recipient is
resident in a tax haven). Main exception is dividends.
15%
CIDE
Tax on cross-border royalties and service payments when there is a transfer of
technological knowledge
10%
Import duty – varies by type of product
Average 14%
ICMS
State value added tax on goods (and a restricted number of services) – rates vary
from 7-25% across the 26 states and one Federal District
Most common is
18%
ISS
Service taxes on revenues: rates vary from city to city but under federal law the
minimum rate is limited to 2% and maximum 5%
2% - 5%
II
Federal taxes
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State taxes
Source: Deloitte research & analysis; The Economist; The Wall Street Journal; International Tax Review
Municipal taxes
© 2013 Deloitte LLP. Private and confidential.
2014 FIFA World Cup Tax Benefits
•The Tax benefits atFederal Level are available to:
• FIFA;
• FIFA Subsidiary in Brazil;
• FIFA Confederations;
• FIFA members foreign Associations; and
• FIFA Service Providers and FIFA Commercial Affiliates domiciled abroad, which are broken
down in the executive Branch, or through individual or company they hired to represent them,
subject to the requirements established by the Federal Revenue Service of Brazil.
• The entities mentioned above will be able to import food, medical supplies, including
pharmaceuticals, fuel and office supplies, trophies, medals, plaques, figurines, badges, pennants,
flags, commemorative objects, promotional material, printed brochures and other assets with
similar purpose, to be freely distributed or used in events, goods of types and in quantities
normally consumed in sports the same magnitude, and other non-durable goods, considered as
those whose life is up to one (1) year with exemption of taxes levied on import of goods.
• Additional Benefits are available in some States and Municipalities
©2013 Deloitte Touche Tohmatsu
Some Useful Tips – it’s not all bad news
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Always take advice. Do not underestimate the complexity or profit and risk
implications if you get your cost base wrong:
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Compliance matters: the tax authorities are litigious. You may not avoid tax
assessments and penalties completely, but you will significantly reduce your risk.
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Brazilian States have grants and incentives: They are willing to negotiate with nw
business ventures.
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Specific incentives are available for: 2016 Rio Olympic Games and the World Cup
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Dividends can be paid without withholding tax, although withholding tax applies to
most methods of cash repatriation,
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Deloitte has 11 offices in Brazil to Support You: Can handle all areas of tax
compliance and a specialized group in Brazil in London.
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©2013 Deloitte Touche Tohmatsu
Deloitte
Martin Jaycock
Alberto Bertocco
Partner
Senior Manager
Brazil Services Group & International Tax
Brazil Services Group & Indirect Taxes
Deloitte LLP
Deloitte LLP
+44 20 7007 0682
+44 20 7303 6139
+44 7831 158959
+44 7867 156539
mjaycock@deloitte.co.uk
albertocco@deloitte.co.uk
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©2013 Deloitte Touche Tohmatsu
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