BRAZIL Law and Practice Contributed by: Roberta Bilotti Demange and Marina Bertucci Ferreira, Pinheiro Neto Advogados
Brazilian legal entities are allowed to carry forward losses indefinitely, which is important for companies that undertake exploration, development and, later, mining activities. These losses can only offset 30% of taxable profits, which can result in deferral of the utilisation of the losses in the event that the legal entity sustains material losses and profits that are not sub - stantial. As a general rule, the income, capital gains and other earnings paid, credited, delivered, employed or remit - ted by a Brazilian source to a foreign-based individual or legal entity are subject to withholding tax at a gen - eral rate of 15%. The tax rates on capital gains of Brazilian individuals or non-residents (both individu - als and companies) may vary from 15% to 22.5% depending on the amount of the capital gains. Rates may reach 25% for income paid to a person residing in a jurisdiction deemed to be a tax haven or privileged tax regime for Brazilian tax purposes. Social Contribution The social contribution on net profits (CSL) is calculat - ed on the net profits before the allowance for income tax, adjusted by the additions, exclusions and offsets prescribed by tax law. The CSL rate is 9% and the figures paid are not deductible from the income tax base (actual profits). Other federal contributions – PIS (Programme of Social Integration) and COFINS (Con - tribution for the Financing of Social Security) – are lev - ied at the combined rate of 9.25% and are assessed over the gross billings of the company. Tax on Transactions The tax on financial transactions (IOF) is a tax on for - eign exchange, securities, credit, gold and insurance transactions. The IOF/Exchange is currently imposed on a variety of foreign-exchange transactions. Cur - rently, for most exchange transactions, the rate of IOF/ Exchange is 0.38%. Tax on Sales The tax on sales of goods and services (ICMS) is a value-added tax levied by the state on the circula - tion of goods (thus covering the entire chain of trades from the manufacturer to the end consumer) and on the provision of intrastate and interstate transportation and communications services. Normally, the transac -
tion value serves as the ICMS tax base. It is a non- cumulative tax and, as such, generates a tax credit to be offset by the product or service recipient against the tax payable on future transactions. Each Brazilian state is free to establish its own ICMS rates (generally between 17% and 18%). Tax on Services The tax on services (ISS) is assessed on the services provided by a company or independent contractor or professional, in accordance with a list of services attached to a federal supplementary law. ISS is levied by the local municipality at a rate of between 2% and 5% on the service value. Mining Royalties The mining statutory royalty is known as the Finan - cial Compensation for the Exploitation of Mineral Resources (CFEM), and the proceeds of this royalty are shared between the local (75%), state (15%) and federal (10%) governments. The royalty rate varies from 1% to 3.5%, depending on the substance. The royalty is calculated based on the revenue arising from the sales of the ore, with the deduction of marketing taxes. In the event that the mining concession holder actually consumes the substance in its production chain, then the royalty will be calculated based on the market price of the substance or, if such a price cannot be determined, a reference value determined by the ANM. Consumption Tax Reform Overview The approval of Brazil’s consumption tax reform, enacted through Constitutional Amendment No 132/2023 and partially regulated by Supplementary Law No 214/2025, represents a structural transforma - tion of the Brazilian tax system, with direct implica - tions for the mining sector. This tax reform brings to the Brazilian tax system a consumption tax system based on a dual value-added tax (VAT) structure, which aligns Brazil with interna - tional taxation standards, particularly those adopted by member countries of the Organisation for Econom - ic Co-operation and Development.
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