BRAZIL Law and Practice Contributed by: Júlio de Oliveira, Stephanie Makin, Gabriel Lacerda and Carlos Augusto Cruz, Machado Associados
Urban Property Tax (Imposto Predial e Territorial Urbano – IPTU) A municipal tax is levied annually on the ownership or possession of any real estate located in urban areas. The rates vary according to the municipality. In São Paulo, the rates range from 1% to 1.5%, with discounts or additions granted based on the market value and use of the relevant property. Tax on Vehicle Ownership (Imposto sobre a Propriedade de Veículos Automotores – IPVA) A state tax is levied annually on the ownership of land, water and air motor vehicles. The applicable rate may vary by state. In São Paulo, the tax rate varies from 1.5% to 4%. Tax on Real Estate and Related Rights Transfer (Imposto sobre a Transmissão de Bens Imóveis e Direitos Reais – ITBI) A municipal tax is levied on inter vivos and remuner - ated transfers of ownership or in rem rights over real estate. The applicable rate may vary by municipality. In São Paulo, the general rate is 3%. Social Security Contributions Social security contributions due by companies are generally composed of a fixed rate of 20%, which is supplemented by rates generally varying from 0.5% to 6% in the case of compensation paid to employees. For contributions to support welfare services (which are in addition to social security contributions), the rates are up to 5.8% above the compensation paid to employees. 3. Corporations and Non-Corporate Businesses 3.1 Form of Closely Held Local Businesses Closely held local businesses usually operate in cor - porate form. 3.2 Individual and Corporate Rates Income earned by individual professionals is subject to progressive rates up to 27.5%. In principle, the 34% corporate rate (25% IRPJ rate plus the 9% CSLL rate) is higher than the individual rate. However, if the company is subject to the deemed profit regime, there
the clearance of such goods from customs. Applica - ble rates vary per imported item and may range from 0% to 35%. II is not a VAT. Consumption Tax Reform (IBS, CBS and Selective Tax) In December 2023, the Brazilian Federal Constitution was amended to implement consumption tax reform, aiming to simplify indirect taxes in Brazil. The main change provided by this amendment is the replace - ment of the ISS and ICMS with the tax on goods and services ( Imposto sobre Bens e Serviços – IBS), and of PIS/COFINS with the contributions on goods and services ( Contribuição sobre Bens e Serviços – CBS). The CBS and IBS will work as a dual form of VAT, pro - viding simplicity and aligning the Brazilian tax system with international practice. Further, the current IPI will be eliminated (except for some products that have an equal product manu - factured in the Manaus Free Trade Zone), and a new selective tax was created to apply to transactions (domestic and imports) involving goods and services that are harmful to the environment or health. The amendment also establishes a transition period of ten years in which the ISS, ICMS, PIS/COFINS and IPI will coexist with the IBS and CBS until they are elimi - nated in 2033. PIS, COFINS and IPI (for most prod - ucts) are intended to be phased out as of 2027, and ICMS and ISS rates will be gradually reduced while IBS and CBS rates gradually increase. Applicable IBS, CBS and selective tax rates still depend on further regulation. 2.9 Other Notable Taxes Tax on Financial Transactions (Imposto sobre Operações Financeiras – IOF) A tax is levied on credit transactions at a 0.0082% daily rate plus a 0.38% surcharge, and on exchange transactions (generally at a rate of 3.5%) and insur - ance transactions (at rates varying from 0% to 7.38%), as well as on securities (at variable rates).
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