ICMS and regulation
Posted: Thu Feb 20, 2025 5:51 am
How ICMS works
In practical terms, ICMS is charged when the goods or services are sold to the consumer, who becomes the owner of the goods or services purchased. To understand how the tax is calculated, however, it is necessary to know the tax rate in the state where the organization operates. In situations where the sale is made in the same state, the formula for calculating ICMS is: price of the product x tax rate in the state = ICMS value of the goods. For internal movements, that is, within the state, the variation is around 17 to 20%. In the case of imports, the tax rate is 4%.
In the case of interstate operations, that is, when the company operates in different states, it is necessary to be aware of the differences in the rates charged according to each location. In these situations, the vietnam mobile database Differential Tax Rate (DIFAL) is applied, created to minimize the inequality in revenue between states, since by offering reduced values, a region can become more attractive to business and, therefore, concentrate income. In order to collect ICMS, companies must register with the State Treasury Department of the region in which they operate.
Recently, the debate on the tax system in Brazil has intensified and led to discussions on Tax Reform in the Legislative Houses . According to data from the Movimento Brasil Competitivo (MBC) , Brazilian companies dedicate 38% more of their profits to paying taxes when compared to other countries in the Organization for Economic Cooperation and Development (OECD).
In addition to the financial effects that taxes have on companies, understanding how each of the operations works, as well as understanding the relevance of taxes in the Brazilian tax context, is essential for companies to remain compliant. In August 2021, the Federal Senate unanimously approved Complementary Bill (PLP) 32/2021 , which regulates the collection of ICMS on products and services provided to end consumers located in another state.
The proposal, which regulates Constitutional Amendment 87, determines that in transactions between companies and consumers who are not ICMS taxpayers from different states, it will be the responsibility of the supplier to collect and pass on the difference to the consumer state. In addition, the DIFAL on interstate transportation services must be collected by the carrier in the state of the non-taxpaying consumer. If the goods or service are destined for a different state, the ICMS difference will be due to the state in which the goods actually entered.
In practical terms, ICMS is charged when the goods or services are sold to the consumer, who becomes the owner of the goods or services purchased. To understand how the tax is calculated, however, it is necessary to know the tax rate in the state where the organization operates. In situations where the sale is made in the same state, the formula for calculating ICMS is: price of the product x tax rate in the state = ICMS value of the goods. For internal movements, that is, within the state, the variation is around 17 to 20%. In the case of imports, the tax rate is 4%.
In the case of interstate operations, that is, when the company operates in different states, it is necessary to be aware of the differences in the rates charged according to each location. In these situations, the vietnam mobile database Differential Tax Rate (DIFAL) is applied, created to minimize the inequality in revenue between states, since by offering reduced values, a region can become more attractive to business and, therefore, concentrate income. In order to collect ICMS, companies must register with the State Treasury Department of the region in which they operate.
Recently, the debate on the tax system in Brazil has intensified and led to discussions on Tax Reform in the Legislative Houses . According to data from the Movimento Brasil Competitivo (MBC) , Brazilian companies dedicate 38% more of their profits to paying taxes when compared to other countries in the Organization for Economic Cooperation and Development (OECD).
In addition to the financial effects that taxes have on companies, understanding how each of the operations works, as well as understanding the relevance of taxes in the Brazilian tax context, is essential for companies to remain compliant. In August 2021, the Federal Senate unanimously approved Complementary Bill (PLP) 32/2021 , which regulates the collection of ICMS on products and services provided to end consumers located in another state.
The proposal, which regulates Constitutional Amendment 87, determines that in transactions between companies and consumers who are not ICMS taxpayers from different states, it will be the responsibility of the supplier to collect and pass on the difference to the consumer state. In addition, the DIFAL on interstate transportation services must be collected by the carrier in the state of the non-taxpaying consumer. If the goods or service are destined for a different state, the ICMS difference will be due to the state in which the goods actually entered.