Expert shares this key advice
In the latest Ask the TCS column, a reader asks if it’s worth exporting his product to Brazil given that his local competitors don’t have to pay import duties. A Trade Commissioner from Rio responds with this key advice.
A reader from Montreal asks:
Dear Trade Commissioner Service,
We manufacture modular gas production plants in Canada for export throughout the Americas. We have several opportunities in Brazil, but we face stiff competition as some of our competitors manufacture similar equipment locally and are therefore not subject to import duties.
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Our plants consist of several modules and I believe that each would fall under a different HS code. It would be helpful to determine how the landed cost of each component in Brazil would be affected by the import duties depending on its HS code. If the duty rates differ, we may be able to secure business by manufacturing some of the higher-taxed items locally. Would you be able to illustrate the tariff breakdown based on our HS code? All equipment will arrive and be installed in the state of São Paulo.
Thank you in advance for your assistance.
Best regards,
Anonymous
Nadine Lopes, Trade Commissioner at the Canadian Consulate in Rio de Janeiro, answers:
Dear reader,
Thank you for your email. Brazil is currently developing its large oil and gas reserves so your inquiry is timely.
Below you will find a breakdown of the different import duties charged based on the HS codes that you provided.
7311.00
Import Tax: 14.0%
IPI (Excise Tax): 10.0%
PIS (Federal Tax): 1.65%
COFINS (Federal Tax): 7.6%
ICMS (State Tax): 18.0% to the state of São Paulo
8414.80 / 8419.40 / 8419.50 / 8419.60 / 8421.39
Import Tax: 14.0%
IPI (Excise Tax): 0%
PIS (Federal Tax): 1.65%
COFINS (Federal Tax): 7.6%
ICMS (State Tax): 18.0% to the state of São Paulo
8481.80
Import Tax: 18.0%
IPI (Excise Tax): 0%
PIS (Federal Tax): 1.65%
COFINS (Federal Tax): 7.6%
ICMS (State Tax): 18.0% to the state of São Paulo
However, the taxation of imported goods into Brazil can be quite complex. There are no straightforward answers to queries of this type. Based on our experience and that of the experts we consulted, other elements must be considered when doing a feasibility study of this nature.
According to a lawyer who specializes in foreign trade taxation, the first thing that one must take into account is the need to harmonize your HS codes with those of Mercosur, the customs union of Brazil, Argentina, Paraguay and Uruguay. As I understand it, they are not described under the same standard.
In addition, taxation for certain imported goods can change quite often. It is not unusual for some goods to be temporarily exempted from duties while, at other times, additional taxes are imposed on these same products.
This practice is common and reflects the complexity of taxation policy in Brazil, which is subject to constant discussion and review. One must therefore always be careful and consult with a professional in this area as to the current status of certain import duties in order to undertake an effective and reliable analysis. Any mistakes can result in additional expenses and long delays to your company.
According to the two taxation professionals we consulted, it is not unusual for foreign companies to make costly errors if they do not have the most up-to-date information. Be sure to hire reputable professionals to help with import duty analysis and planning.
As a courtesy, the professionals we consulted have offered to do a simulation of the import duties incurred as per the HS codes that you provided. Please send me the following information so that they can give you a more complete answer to your question:
- The Incoterms (If using the EXW incoterm, the postal code is needed for quotation of land transportation in the place of origin);
- The estimated gross weight of each unit of product (size of boxes, parts, pallets); and
- The estimated value of the cargo.
Let me know if you would like to get in touch with these key contacts. I would be pleased to provide you with their contact details. Do not hesitate to reach us should you need more information.
I’d also like to take this opportunity to inform you of two upcoming signature events in the oil and gas sector in Brazil in 2010: Rio Oil & Gas and Brazil Onshore. The Canadian Consulate General in Rio de Janeiro will organize a Canadian pavilion at both trade shows.
For more information, contact me at
nadine.lopes@international.gc.ca.
Best regards,
Trade Commissioner (Oil & Gas)
Canadian Consulate in Rio de Janeiro
www.canada.org.br
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