ONESOURCE Indirect Tax Determination Webinar Brazil March 21, 2013

Transcription

1 ONESOURCE Indirect Tax ONESOURCE Indirect Tax Determination Webinar Brazil March 21, 2013 CAMILO MARTINEZ VAT BUSINESS CONSULTANT

2 Today s Speaker CAMILO MARTINEZ VAT Business Consultant for Thomson Reuters, Boston Indirect Tax group. 20 years experience in the field and a Juris Doctor by the prestigious Sao Paulo (Brazil) University, specializing in private international law. Worked in corporate matters and international direct and indirect taxation in Brazil, England, France, Hungary, and Venezuela. Lectured in Brazil for think-tank international trade candidates to the Brazilian IRS, and in Europe for the VAT Forum. Advised many companies on a wide range of issues. Familiar with the various indirect tax regimes worldwide, including European VAT, Canadian and Australian GST, Brazilian taxation, and Japanese consumption tax.

3 General outlook for Brazil Opportunities: Collectively, US-headquartered companies are the largest foreign investors in Brazil Economic development followed political stability Market of approx. 200 million people Challenges: Heavily regulated economy Foreign exchange controls Slow judiciary process Organized labor

4 Common characteristics with LATAM No tax harmonization with neighboring countries VAT Withholding, e-invoicing, e-bookkeeping and e-returns are methods to combat tax evasion VAT credits to be carried forward No VAT refund to non-resident foreign entities No non-resident registration Locked VAT credits

5 Brazil General Considerations Indirect taxation at the 3 administrative levels: Federal, State and Municipal (local) Mixture of cumulative and non-cumulative taxes Tax-on-Tax across administrative levels Thousands of taxing jurisdictions VAT Withholding (ST Substituição Tributária) No refund mechanism for non-resident entities Credit carried forward

6 Brazil General Considerations contd. Limited cash refunds Opportunity to sell excess credits Statute of limitation: 5 years No non-resident registrations No VAT groups SPED initiative One of the main challenges: Trapped credits due to export, inter-state commerce or VAT Withholding

7 N W E S

8 BR Federal Taxes in Determination 1 Jurisdiction Tax BRAZIL IPI (Imposto sobre Produtos Industrializados) PIS (Programa de Integração Social) COFINS (Contribuição para o Financiamento da Seguridade Social) Description Non cumulative tax on manufacturing and importation of goods Gross receipt tax Cumulative or non Cumulative Gross receipt tax Cumulative or non Cumulative

9 BR State Taxes in Determination Jurisdictions Tax BRAZIL Description ICMS (Imposto sobre a Circulação de Mercadorias e Serviços) ICMS ST (Imposto sobre a Circulação de Mercadorias e Serviços Substituição Tributária) Non cumulative tax on goods and selected services Telecommunications, Utilities, inter State and inter Municipal transportation Non cumulative tax on goods VAT withtholding perception Arbitrary profit margins product and/or industry driven Bilateral or multilateral State agreements

10 BR Municipal Tax in Determination 5,000+ Jurisdictions Tax BRAZIL Description ISS (Imposto sobre Serviços) Cumulative tax on most services Thousands of tax jurisdictions Harmonization by Federal Law

11 BR-specific Tax Logic In Brazil BRL % = BRL Federal-level IPI is part of State-level ICMS tax base for b2c transactions but not so for b2b transactions State-level ICMS has two sets of multiple rates, one for intra-state transaction and one for inter-state transactions Federal-level IPI, State-level ICMS and Municipal-level ISS are all part of the taxable base of Federal-level gross-receipts taxes PIS and Cofins Federal-level gross-receipts taxes PIS and Cofins may be recoverable or non-recoverable, depending on the way one declares corporate taxes.

12 Our Brazilian Expertise Fortune 500 Chemical Company 11 countries (Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Guatemala, Paraguay, Peru, Puerto Rico and Venezuela) 23 operating units USD $6 billion/year revenue Complete order-to-cash and procure-to-pay processes VAT Withholding (ICMS ST) in Brazil Go-Live in October 2012 U.S. Retailer of Autoparts POS Brazil (AIRES), go-live in October 2012

13 Brazil and LATAM Employee Base BRAZIL LATAM Mexico City, Mexico 100 employees Cochabamba, Bolivia 51 employees Lima, Peru 105 employees Santiago, Chile 182 employees Brazil employees Buenos Aires, Argentina 263 employees FILENAME Note: CONFIDENTIAL Included TRTA-dedicated NOT FOR GGO REDISTRIBUTION employees 13

14 Contact Information OR Contact us (888) FILENAME CONFIDENTIAL NOT FOR REDISTRIBUTION 14

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