BRAZIL Law and Practice Contributed by: Júlio de Oliveira, Stephanie Makin, Gabriel Lacerda and Carlos Augusto Cruz, Machado Associados
the value of the equity stake of all the related par - ties abroad in the Brazilian company’s net worth; or • if the creditor (related party or not) is located in a tax haven or subject to a privileged tax regime, the total debt amount shall not exceed 30% of the Bra - zilian company’s net worth. Regarding the transfer pricing rules, as of 2024, the interest rate of the loan must comply with the arm’s length principle. 2.6 Consolidated Tax Grouping Consolidated group taxation is not applicable in Brazil and, as a rule, group companies are not allowed to utilise separate company losses. Exceptionally, there are some tax settlement pro - grammes provided by the federal government that allow companies to offset tax loss credits accrued by group companies against federal taxes due. 2.7 Capital Gains The capital gains accrued by a Brazilian company will be included in the IRPJ/CSLL taxable base, subject to general rates described in 1.4 Tax Rates . VAT is a state tax levied on the imports of goods, the domestic circulation of goods, inter-municipal or inter - state transport services, and communication services. Generally, the ICMS rates are: • 17% to 21% (rates vary depending on the goods) on imports and circulation of goods within the same state; • 17% to 21% on communication services; • 12% on transportation services; 2.8 Other Taxes on Transactions VAT on Sales and Services (ICMS) • 4% on interstate transactions involving imported goods that do not undergo a manufacturing pro - cess after their customs clearance, or involving goods submitted to manufacturing if that manufac - turing results in a final product for which more than 40% of the value is in its imported content; • 7% on shipments from taxpayers based in the South/South East to taxpayers based in the North/
North East/Central West and the state of Espírito Santo; and • 12% on other interstate transactions. Tax on Services (ISS) ISS is a municipal tax on services levied on the import and the domestic rendering of services listed in a fed - eral supplementary law. The ISS minimum and maxi - mum rates are, respectively, 2% and 5%. The ISS rates vary in accordance with the service provided and the municipality competent to charge the tax. IPI IPI is a federal tax charged on the domestic shipment of goods from a manufacturing entity (or from an entity that the IPI legislation qualifies as a manufacturing entity even if there is no direct manufacturing, such as entities that import products for resale in Brazil), or on the import of goods (upon customs clearance of manufactured products). IPI rates vary according to the nature of the good (pharmaceutical products, for instance, are subject to zero rates as they are consid - ered essential, whereas luxury or superfluous articles can be taxed at rates of up to 300%) and its classifi - cation under the IPI Table of Rates. IPI rates generally range from 3.25% to 19.5%. Programa de Integração Social (PIS; social integration programme) and Contribuição para o Financiamento da Seguridade Social (COFINS; contribution for the financing of social security) are also due upon import of goods (rates of 2.1% and 9.65%, respectively) and services (rates of 1.65% and 7.6%, respectively). Social Security Contributions on Revenues (PIS/ COFINS) PIS and COFINS are federal social security contri - butions levied on revenues earned by legal entities. Exceptions apply (eg, dividends and revenues derived from exports of goods or services). As a rule, the PIS and COFINS rates are 1.65% and 7.6%, respectively, if the company is subject to the non-cumulative sys - tem, and 0.65% and 3%, respectively, if the company is subject to the cumulative system. Customs Duty (II) The customs duty (II) is a federal tax due on Brazilian importers levied on imports of goods and charged for
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