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The Language of the ICMS Tax in Brazil
By Danilo Nogueira
(Professional translators, editors, consultants, trainers)
Brazil
danilo.tradutor@uol.com.br
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ICMS is the abbreviation of Imposto sobre Operações
Relativas à Circulação de
Mercadorias e sobre Serviços de Transporte
Interestadual e Intermunicipal e de Comunicação,
ainda que as Operações se Iniciem
no Exterior (Tax on the Circulation of Goods,
Interstate and Intercity Transportation and Communication
Services, Even when the Operation is Initiated
Abroad). In fact, with ICMS, you get three taxes
for the price of one, probably the Government's
answer to the demand for a reduction in the number
of taxes in Brazil. With ICMS, you have (1) a
tax on "circulation" of goods, (2) a
tax on interstate and intercity transportation
services and (2) a tax on telecommunications services.
If you have to pay ICMS at all, the tax will be computed based on value you
added to the taxed item, not on its total
price. |
This article will deal only with the most important of three heads of this particular
Hydra; formerly known is imposto sobre a circulação
de mercadorias and abbreviated ICM.
ICMS is similar to the European
VAT and the Canadian GST. However, unlike VAT
and GST, ICMS does not apply to services other
than those corresponding to the second and third
heads of the Hydra. European translators pay VAT;
Brazilian translators do not pay ICMS: we pay
ISS, a local service tax of an entirely different
nature. There is a lot of talk about replacing
ICMS and its sister tax IPI with a purer form
of VAT, to be known as IVA (Imposto sobre o
Valor Agregado)—but, so far, it is only talk.
What is added value?
ICMS and its predecessor, ICM, are value-added
taxes (impostos sobre o valor agregado). This
means that if you have to pay ICMS at all, the
tax will be computed based on value you added
to the taxed item, not on its total price.
Very simply stated, this means
the following: Companhia Polidora de Peças
buys rough parts from Companhia de Peças
Brutas for $9, polishes them and sells the polished
parts for $12. Companhia Polidora de Peças
has to pay ICMS on the $3 it added to the value
of the parts ($12-$9), not on the total price
($12). In practice, computing added values is
not always easy and thus the tax is treated as
não-cumulativo (non-cumulative,
non-cascading). Let me try to show how this works.
A long story, perhaps.
Mechanics of ICMS
We should probably start with the sistemática
de apuração (mechanics). No,
we cannot. We must begin with some preliminary
information. There it goes:
ICMS is a State tax and thus
the regulamento known as RICMS (ICMS
Regulations) differs from one State to the next.
However, State regulations must comply with the
Código Tributário Nacional
(Brazilian Tax Code), abbreviated CTN and
CTN, in turn, is subject to the restrictions set
forth in the Constituição (Constitution).
So the basics are the same nationwide.
Companies subject to ICMS must
ter inscrição estadual (be registered
for ICMS, be registered as State taxpayers).
The inscrição estadual (state
registration number, state tax ID) must be shown
in all notas fiscais (tax invoices) issued
by companies whose operations are subject to ICMS.
A nota fiscal is a very
formal document and printers will only supply
tax invoice orders if shown evidence that the
buyer is a legitimate merchant registered for
ICMS and authorized to order a new lot of them.
Many companies have been authorized
to print their own notas fiscais using
their own computers for the task, or to issue
cupons fiscais, or tickets fiscais,
which are equivalent to notas fiscais.
However, the fact is that you cannot just
sit down at your computer and prepare a nota
fiscal any old way you want. There are strict
rules to be followed. Cupons, tickets and
notas fiscais together are referred to
as documentos fiscais, but we often talk
about nota fiscal, even when a coupon
or a ticket is meant.
In theory, a documento fiscal
is distinct from a fatura (invoice)
or conta (bill). In practice, the three
documents are usually combined into a single one.
However, a documento fiscal, no matter
what other uses are made of it, is a document
issued for tax purposes and must contain information
required by tax regulations.
In theory, anyone carrying goods
must be prepared to show the appropriate nota
fiscal if so asked by a fiscal (tax
inspector). In practice, you will see cars marked
fiscalização (tax inspectors)
parked on streets and roads and tax inspectors
ordering trucks to stop for inspection. They will
ask for the notas fiscais, which they will
check against the mercadorias (goods).
What happens when the fornecedor (supplier)
cannot issue a documento fiscal?
There are two classic cases of suppliers who can
not issue one of those documents. In one case,
the supplier is a non-resident. For instance,
if Companhia Polidora de Peças buys rough
parts from a Thai company, it cannot expect its
supplier to issue a valid Brazilian tax document.
So, Companhia Polidora de Peças must issue
a Documento Fiscal de Entrada, a kind of
"reverse" tax invoice, issued by the
buyer, not by the supplier.
The same thing happens when
a company dealing in second-hand computers buys
a an old machine from a translator. Translators
do not ordinarily sell merchandise (they provide
services) and thus não têm inscrição
estadual (are not registered for ICMS). Thus,
they cannot issue a documento fiscal for
the sale of merchandise, and the buyers must issue
the document themselves.
What data must be shown on a tax document?
Tax documents may be further divided into
two different types: those issued to the consumidor
(consumer) and those issued to another contribuinte
(taxable person, taxpayer).
Notas para consumidor are
very simple: name of fornecedor (supplier),
valor da operação (transaction
value, supply value) and a few other items, such
as place and date.
Documents for transactions between
contribuintes (taxable persons) are more
complicated. They must identify the buyer (including
inscrição estadual) and also
destacar o imposto (identify the amount
of tax)—that is, they must show the amount of
ICMS paid on a separate line. You will see why
this is important in a few minutes.
If the operação
(operation, transaction) is taxed at other
than the maximum rate or benefits from some other
kind of favor fiscal (relief) the document
must also show fundamentação
(specify law or regulation granting the relief)
or the fisco (tax authorities) will reclamar
o imposto (claim the tax) at the full rate.
What are entradas and saídas
An entrada is goods received. All
entradas must be described in a documento fiscal.
Once a company receives a documento fiscal
corresponding to an entrada it must be
lançado (entered) in the livro-registro
de entradas (good received register, supplies
received register, inputs register). A saída
is goods supplied. All saídas must
be described in a documento fiscal, and
all of those must be entered in a livro registro
de saídas (goods shipped register,
supplies made register, outputs register).
What is a crédito tributário?
Crédito tributário (tax claim)
is the Government's right to demand payment of
the tax. A crédito tributário
is estabelecido (established) when
the operação (transaction)
is tributada (taxed). This requires a fato
gerador or fato imponível (taxable
transaction). Brazilian law depends much on doutrina,
which is the body of theoretical legal writing.
And escritos doutrinários are full
of learned discussions about the differences between
fato gerador, fato imponível and
hipótese de incidência and
your client will certainly explain the differences
to you in detail. However, do not expect all of
your clients to agree on what the differences
are.
There are also cases of não-incidência
(transactions that are not taxed, tax-free transactions).
[The current vogue for using não plus
an abstract (não-exclusão, não-incidência)
is maddening, but I will have to deal with
that in a future article, God allowing.] Não-incidência
may be of three types:
Imunidade (immunity), the
cases in which the Constitution itself contains
a provision freeing the operation from the tax.
For instance, book sales are immune from taxation.
Isenção (exemption),
the cases in which a specific law (not the Constitution)
frees the operation from taxation.
Não-incidência
pura e simples (transactions falling outside
the scope of the law), the cases in which the
law simply does not refer to the operation.
Under certain cases, the Government
will grant an anistia (amnesty), which
does not require an explanation. Anistias together
with hipóteses de não incidência
make up exclusões do crédito
tributário (cases where no claim for
the tax arises).
How is ICMS liability computed
At stated periods Companhia Polidora must
apurar (compute) its ICMS liability. This
is a three-step process.
First Companhia Polidora adds
up the ICMS identified in all tax documents received
from its suppliers. The total is referred to as
créditos de ICMS (ICMS credits,
ICMS inputs) and reflects ICMS paid by the Company's
suppliers.
Then, the Company adds up all
the ICMS identified in all tax documents it issued.
This is referred to as débitos de ICMS
(ICMS outputs, ICMS debits) and reflects gross
ICMS owed by the Company.
Finally, the Company deducts
tax inputs from outputs, to arrive at the actual
amount of ICMS owed, which is the crédito
tributário.
The terminology may be a bit
confusing, but the procedure is obvious.
In other words, ICMS is called
não-cumulativo (non-cumulative),
because each taxpayer's ICMS bill is always computed
by deducting ICMS paid by other taxpayers upstream.
Seen from another standpoint, it is an imposto
sobre o valor agregado (value-added tax) because
in the end taxpayers only pay ICMS on the value
they add to the product, although this is computed
in an indirect manner.
Additional information and the usual disclaimer
I try to be original in my writings, but writing
an original disclaimer for each article is really
beyond my powers. However a disclaimer is required:
I am neither lawyer nor accountant, but a translator
and am contented with my station in life. So all
this should be construed not as an explanation
of how to handle ICMS, but as a terminological
toolkit for translators perplexed with texts on
ICMS. In fact, my articles always include a certain
amount of generalization and lack of precision
that would be unacceptable in the work of a lawyer
or CPA.
The terminology used is cribbed from Brazilian,
international and U.K. sources. Most of all, I
recommend:
Victor Thuronyi, editor, Tax Law Design and
Drafting, (Washington, D.C., International
Monetary Fund, 1996). Only Volume I has been published
so far. A work written in a very clear language
on comparative tax law that should be translated
into Portuguese and read by all Brazilian lawyers.
That might convince them that it is possible to
write a very technical text on tax matters without
using grandiloquent, highfalutin' and sesquipedal
language.
CCH Editions Limited British Master Tax Guide.
Several editions. A classic handbook and a
mine of terminological information because it
discusses VAT.
MCA Führer and MRE Führer, Resumo
de Direito Tributário, (São
Paulo, Malheiros). Several editions. A book written
in plain language, which contains all the information
a translator needs. In fact, the same authors
have published six more booklets on different
branches of law, all of them highly recommended
for those who want a readable introduction.
EMF Jardim, Dicionário Jurídico
Tributário (São Paulo, Saraiva
1996).
This article was originally published at Translation Journal (http://accurapid.com/journal).
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