SUMMARY

1–INTRODUCTION TO THE TAX SECTOR.......................................................... 03

• Importance of the Fiscal Sector................................................................. 03
• What is the Fiscal Sector? ....................................................................... 03
• Importance of the Tax Sector for a Company...................................... 04
• How technology impacts the Tax Sector............................................ 04
2. TAX OBLIGATIONS ................................................................. 05
• Main obligations and ancillary obligations.........................................05
• Legal hierarchy and initial understanding of taxes..............................05
• Definition of tax.................................................................06
• Types of taxes..........................................................................06
• Constitutional Immunity...................................................................06
• Cumulativity vs Non-Cumulativity..................................................07
• Summary of main taxes and contributions 07
• National Registry of Legal Entities 08
3–TAXATION MODALITIES ............................................................ 09
• TAXATION ON PROFIT.............................................................. 09
• IRPJ and CSLL .............................................................................................09
• IRPJ AND CSLL - CALCULATION BASED ON PRESUMED PROFIT ......................................09
• Deductions from Gross Revenue of the Activity 11
• Calculation of Presumed Profit 11
• Practical Table of Percentages – IRPJ 12
• Other Income and Capital Gains ......................................................... 13
• Calculation of Tax Due ....................................................................... 13
• Tax Deductions .............................................................................. 13
• Collection of the Tax ......................................................................... 14
• IRPJ AND CSLL - CALCULATION BASED ON ACTUAL PROFIT .............................................. 14
• Quarterly Assessment ............................................................................... 15
• Annual Report ..................................................................................... 15
• Definition of the Option
• Calculation of the Monthly Estimate to Be Collected .............................................. 16
• Monthly Suspension or Reduction Statements ............................................ 16
• Monthly Statements of Suspension or Reduction 16
• Requirements of the Monitoring Balances or Balance Sheets of Estimates ........18
• Payment of the Annual Adjustment Balance .......................................................... 18
• IRPJ and CSLL - CALCULATION BY ARBITRATED PROFIT
• Profit arbitration percentages ......................................................... 19
• Net revenue known ..................................................................... 20
• Calculation of the tax owed ........................................................................ 21
• Tax deductions ............................................................................. 21
• IPI - TAX ON INDUSTRIALIZED PRODUCTS .............................. 21
• Concept of industrial establishment ...................................................... 23
• Tax assessment ............................................................................... 24
• PIS and COFINS ......................................................................................... 25
• Exemption / Non-Incidence .............................................................. 26
• Base for Calculation of Contributions ............................................................. 26
• Admitted Exclusions ............................................................................... 27
• PIS and COFINS rates ................................................................... 27
• Credits of PIS/PASEP and COFINS 'Non-Cumulative' ............................... 28
• Collection ......................................................................................... 30
• Methodology of investigation ......................................................................... 30
• SIMPLE NATIONAL

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 • Definition of Micro Enterprise (ME) and Small Business (EPP) ............. 32
• Covered taxes
• Gross Revenue ......................................................................................... 33
• Prohibitions on entry into the Simples Nacional ................................................ 35
• Impeditive Activities .............................................................................. 36
• GENERAL ASPECTS OF ICMS .................................................................. 36
• Federal Constitution of 1988
• Tax on Services of Any Nature (ISSQN) ................................. 39
• Applicable legislation ................................................................................ 39
• Tax Trigger of ISSQN ........................................................................... 39
• List of Services ................................................................................... 40
• Place of Incidence of ISSQN
• Passive Subject .................................................................................... 42
• Responsible/Substitute Contributor ......................................................... 42
• Calculation Basis ...................................................................................... 43
• Rates .............................................................................................. 43
• ISSQN and the Simples Nacional ..................................................................... 43

4–TAX DOCUMENTS ........................................................................ 44

• TAX DOCUMENTS......................................................................44

5 TAX ACCOUNTING ...................................................................... 45

• TAX ACCOUNTING .....................................................................45

6–FEDERAL OBLIGATIONS ............................................................ 46

• FEDERAL OBLIGATIONS......................................................................46

REFERENCES............................................................................................ 48

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1. INTRODUCTION TO THE TAX SECTOR

Importance of the Fiscal Sector

The tax department is one of the essential areas for the continuity of
operations of a company. Regardless of the field of activity or the size of
company, all Brazilian legal entities need to deal with numerous requirements
laws related to taxes, ancillary obligations, and various changes in legislation
about the subject.

Although its activities are very much related only to compliance with
legal obligations and the carrying out of highly bureaucratic activities, the truth is that the
The tax department can play a leading role in the success of a company.
–be ensuring compliance with all legal obligations, reducing costs or
generating useful information for business management.

What is the Fiscal Sector?

For people who do not deal directly with the tax department, it is very
It is common to have the idea that professionals in this sector spend the whole day just
issuing invoices and calculating taxes. However,these manual activities
we are spending less and less time in the routines of these professionals-that also exercise
an important strategic function.

Understanding all the functions performed by the tax department is very

important to understand its importance within an organization. See which
these are the main ones:
• Receiving and fiscal writing - which is the routine of receiving and recording all the
invoices;

• Conference of all tax documentation;

• Fiscal entries and exits log;

• Issuance of invoices for returns, shipment for repairs, and industrialization;

• Constant updates to keep up with changes in tax legislation

tax

• Tax assessment;
• Analysis of the suppliers' registration data with the tax authorities;

• Assistance in determining the tax classification of new products

marketed;

• Delivery of accessory obligations - such as Tax and Accounting Bookkeeping

Digital (EFD) via Public Digital Bookkeeping System (SPED).

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Importance of the Tax Sector for a Company

How can you deduce based on the functions performed by the department
fiscal, this sector has great importance for an organization to continue
operating calmly. To reinforce the role of the tax department, we will analyze
the main benefits of the activities carried out by the tax department:

• Meeting all tax obligations on time, creating a good relationship with

The tax authorities are reducing issues with inspection that can result in fines;

• Utilization of tax benefits that may be responsible for reducing the

operational costs of a company and positively impact the results
financial

• Generation of useful information that can be utilized by the manager of

company in decision making;

• Agility in internal processes and assurance of the circulation of goods

sold by the company;

• Optimization and predictability of cash flow in relation to commitments

taxes that generate costs—such as the payment oftaxes, fees and contributions.

How technology impacts the Tax Sector

Throughout this article, we better understand all the functions that are
performed by the tax department, right? As we discussed earlier,
A large part of manual and repetitive processes are no longer performed by work.
human, but rather bydigital solutions that enable process automation.

This is only possible thanks to technological evolution and specific software for
assist the tax department. Among these solutions are those that allow for the
management of tax documents and tax guides or even automatic calculation
of taxes.

The tax departments that are able to incorporate these new tools of
automation can take a leap in its performance and achieve even better results
but more satisfying—eliminating costs and increasing productivity in the sector. From this
In this way, the entire organization benefits.

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2. TAX OBLIGATIONS

Main obligations and accessory obligations

The term 'tax obligation' refers to the duty of a taxpayer to act.

responsible party or third party by law.

According to Article 113 of theCTN— National Tax Code the obligation

taxation is divided into:
Principal.

Accessory.

The obligation is primary when the taxpayer has the provision (by duty) the
payment of taxes or monetary penalty (fine in cash).

The main tax obligation arises with the occurrence of the taxable event and
it extinguishes together with the tax credit arising from it (article 113, § 1, of
CTN). Example: generating event - circulation of goods, subject to ICMS.

The main obligation only ceases with payment (collection) of the

Integral value due. If collected partially, it is not considered extinguished.
The obligation is accessory when, by force of law, the performance to be fulfilled is the
to do or not to do something, or to allow it to be done by the Tax Authority, all in
interest in the collection or taxation enforcement (article 113, § 2, of the CTN).

Example: recording of merchandise circulation operations (invoices),

subject to ICMS, and the assessment of the respective debtor (or creditor) balance in thetax books.

It should be noted that, regardless of whether compliance is required or not

main obligation, the taxpayer is always required to comply with the ancillary obligation.

This is the case, for example, when a sale is exempt from ICMS, but this fact does not
exempting the merchant from issuing the respective Invoice, covering the operation.
Or to ascertain the creditor balance of ICMS (balance in favor of the taxpayer, where there will be no
collection of the tax.

Legal hierarchy and initial understanding of taxes

Let's start with Kelsen's pyramid, which hasthe Constitutionat its vertex
(topo), as it is the foundation of validity for all other norms of the system.
Thus, no norm of the legal system can oppose toConstitution:she is
superior to all other legal norms, which are therefore called
infraconstitutional.

NaConstitutionthere are original constitutional norms and constitutional norms

derivatives. The original constitutional norms are the product of the Constituent Power
Originating (the power that elaborates a newConstitutionthey integrate thetext
constitutionalsince it was enacted in 1988.

The derived constitutional norms are those that result from the manifestation
of Derived Constituent Power (the power that amends theConstitutionthey are the so-called
constitutional amendments, which also sit at the top of Kelsen's pyramid.

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Definition of tax

According to Article 3 of the National Tax Code, 'Tax is any provision

mandatory pecuniary, in currency or whose value can be expressed in it, that does not
constitutes a sanction for illegal acts, established by law and enforced through activity
fully linked administrative.

Types of taxes

The Federal Constitution establishes in its article 145 that the Union, the States, the
The Federal District and the Municipalities may establish the following taxes:

• taxes
• fees, due to the exercise of police power or by the effective or
potential, of specific and divisible public services, provided to the taxpayer
you put at your disposal;

• improvement contribution resulting from public works.

These are the main tax species provided for in the Federal Constitution.
Meanwhile, other types of taxes such as loans are also anticipated.
mandatory (art. 148), the contribution for the financing of public lighting service (art.
149-A) and social contributions (art. 195).

Constitutional Immunity

Without prejudice to other guarantees granted to the taxpayer, it is prohibited for the Union,
to the States, to the Federal District, and to the Municipalities to establish taxes on:

• heritage, income or services, from one another;

• temples of any worship;

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 • assets, income or services of political parties, including their foundations, of the
labor unions of workers, educational institutions and
social assistance, non-profit, meeting the requirements of the law;

• books, newspapers, periodicals and the paper intended for their printing.

Cumulativity vs Non-Cumulativity

It is said that the tax that applies in two or more stages is cumulative.
circulation of goods or services, without the possibility of being deducted in the subsequent stage.
amount of the tax debt generated in the previous stage. Typical example of this modality
the tax is ISS. The tax is non-cumulative when the amount of the tax debt
generated at a stage of the circulation of the goods can be deducted from the amount owed in
next stage. Brazilian examples are IPI and ICMS.

Summary of the main taxes and contributions

Federative Entity Tribute

PIS - Social Integration Program

COFINS - Contribution for the Financing of Social Security

Corporate Income Tax

CSLL - Social Contribution on Net Profit

Union
IPI - Tax on Industrialized Products

II - Import Tax

Export Tax

ITR - Tax on Rural Land Property

ICMS - Tax on the Circulation of Goods and Services

interstate and intermunicipal transport and communication
States and District
IPVA - Tax on the Ownership of Motor Vehicles
Federal

ITCD - Tax on Inheritance and Donations

ISSQN - Tax on Services of Any Nature

Municipalities IPTU - Urban Property Tax

ITBI - Tax on the Transmission of Real Estate (inter vivos)

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National Register of Legal Entities

It is said that the tax that applies at two or more stages is cumulative.
circulation of goods or services, without being able to deduct it in the subsequent stage.
amount of the tax debt generated in the previous step. Typical example of this modality
of taxes is the ISS. The tax is non-cumulative when the amount of the tax debt
generated at a stage of the circulation of the goods can be deducted from the amount due in
next stage. Brazilian examples are IPI and ICMS.

NoBrazilThe National Register of Legal Entities(acronym:The CNPJ is a number

the only thing that identifies alegal entity and other types of legal arrangements without
legal personality (such as condominiums, public agencies, funds) withRecipe
FederalBrazilian (agency of the Ministry of Economy). The CNPJ includes the information
registration of entities of interest for the tax administrations of the Union, of the
States, the Federal District and the Municipalities, and it is necessary to process (Art. 15, of the
Law 11.419/2006). The CNPJ was created on July 1, 1998, through the.
Normative Instruction SRF No. 27/1998, as an evolution of the old General Registry of
Taxpayers - CGC (Laws 4,503/64 and 5,614/70) and sometimes it is also spelled
as CNPJ-ME. It is regulated by Normative Instruction RFB 1.470/2014.
The Registration serves as an identity and it includes information such as:

• Opening date;

• company_name

• Title or trade name - if any;

• Code and description of the main economic activity - theCNAE;

• Code and description of secondary economic activities - if any;

• Code and description of thelegal nature;

• Address;

• Registration status - In the query available on the Receita's website

Federal.

The registration in the CNPJ is done based on the establishments, which receive the
same basic identification number of the respective matrix, complemented by a
specific identifier for each establishment.

Entities domiciled in Brazil, including legal entities by

equalization, are required to register in the CNPJ before starting their activities,
all your establishments located in Brazil. They are also required to
register the branches of foreign companies operating in Brazil with the CNPJ.

In the CNPJ, each establishment contains various attributes: registration number,

business name
indicative of matrix or branch
main and secondary economic activities, registration status, responsible party under the CNPJ, etc.

The CNPJ must be informed in anyinvoicefrom anycompanywell

like inpackagingof any industrialized product.

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3. TAXATION MODALITIES

TAXATION ON PROFIT

Since the establishment of the so-called current account system from the year-
1992 calendar, the Corporate Income Tax - IRPJ and the Contribution
Social on Net Profit - CSLL is due to the extent that the earnings and
profits are being earned. The calculation of the amounts to be paid is done over a period of
time given by law. It is called the assessment period.

IRPJ and CSLL

Since the establishment of the so-called current account system starting from the year-
1992 calendar, the Corporate Income Tax - IRPJ and the Contribution
Social on Net Profit - CSLL is due insofar as the income and
profits are being earned. The calculation of the amounts to be paid is done over a period of
time given by the law. It is the so-called investigation period.
The assessment period that was monthly until the calendar year of 1996 is now
as a rule, quarterly. The annual calculation, with monthly estimates for collections is
an option granted to legal entities taxed on actual profit, mandatory or
for having chosen this tax system.
Companies opting for presumed profit calculate income tax and the
social contribution on profit quarterly. The tax regime chosen by
the company must respect its activity, economic development, profitability, among others
other aspects inherent to the tax planning of the legal entity.
The option is made in the first payment related to the IRPJ of the calendar year,
being irrevocable for the same calendar year.
Another decision to be made is the tax collection regime (Cash vs. Accrual)
the accrual basis addresses taxation in the presence of the taxable event while the cash basis
the box addresses taxation in the existence of a receipt. Moreover, this definition is
important for the management and financial health of the legal entity.

IRPJ and CSLL - CALCULATION ON PRESUMED PROFIT

Since January 1, 1997, the presumed profit has been calculated

quarterly on March 31, June 30, September 30, and December 31
of each calendar year, or on the date of extinction of the legal entity, which occurred during the
year-calendar.
In presumed profit, the calculation of the amounts owed is based on a profit.
estimated based on gross revenue and increases, but nothing prevents this person
legal make the monthly payments, with the presumed code (2089), instead of the
quarterly settlement, provided that the additional amount due is adjusted in the last month of the quarter.

Note that, although payments are made (at the discretion of the person
legal) monthly, the fields "reporting period" and "due date"
must always be filled in relation to the quarterly periodicity, in order to
clearly demonstrate that it is an advance payment, that is, collection
to the public coffers before its due date.

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 The option for the presumed profit system can only be exercised by companies.
industrial, commercial or service rendering whose gross revenue in the calendar year
previously it had been up to R$ 78,000,000.00 (seventy-eight million reais).
When a legal entity has started activities during the year, the limit is
from R$ 6,500,000.00 (six million five hundred thousand reais) multiplied by the number of
months of activity that year.
The choice for this form of taxation is formalized during the year.
calendar, and manifested with the collection in the month of April of the first or only installment.
corresponding to the first quarterly period of assessment of the calendar year (January to
March). It requires a lot of care at this point, as once the choice is made, it is
irrevocable for the entire calendar year. Companies that begin activities from
April of the calendar year expresses the option for presumed profit with the
payment of the tax related to the quarter in which the event occurred.
It is common for companies to confuse presumed profit with payments.
monthly by estimation. Although both systems are based on the presumption of
profit, the striking feature of differentiation lies in the frequency of payments (the
presumptive is quarterly and the estimate is monthly) and, mainly, in the DARF code
related to the first collection in the calendar year.

They cannot choose the presumed profit system:

• financial entities;

• companies that obtain profits, earnings or capital gains from

exterior

• companies that benefit from tax exemptions or reductions of the tax on

rents, calculated based on the profit from exploitation (companies usually
based in the areas of SUDENE and SUDAM;

• companies providing credit advisory, market analysis, management services

of credit (factoring);
• the real estate companies engaged in construction, incorporation, purchase, and sale of properties that
they have a record of the budgeted cost, in accordance with the applicable regulations for them

activity

• established as a Special Purpose Company - SPE, under the terms of theart. 56

Complementary Law No. 123/2006.

Legal entities that promote real estate incorporation must observe

Special Tax Regime established by Law No. 10,931/2004.

The basis for calculating income tax on presumed profit is determined by

starting from the totality of the revenues resulting from the activity of the legal entity or not, or
thus, capital gains arising from activities not belonging to the segmentation of
the company will also be considered.
The gross revenue from sales and services includes the proceeds from the sale of goods.
in self-employed operations, the price of services provided and the result obtained
in the operations on behalf of others (consignment, for example).
Non-cumulative taxes charged are not included in the gross revenue.
notably from the buyer or contracting party, in addition to the price of the good or service, and the
whether the seller of goods or the provider of services is merely a depositary, for example
do IPI.

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 The ICMS owed by the legal entity, in the capacity of taxpayer, should not be
excluded from gross revenue. However, the ICMS charged from the purchaser, by way of
tax substitution does not integrate gross revenue.
In installment sales, the cost of financing, included in the value of the goods or
services or highlighted on the invoice, integrates the gross revenue as a complement to the price
for sale.

Deductions from Gross Revenue of the Activity

The following amounts can be deducted from the gross revenue of the activity:

• the canceled sales;

• the unconditional discounts granted (discounts on the invoice); and

• the non-cumulative taxes charged separately to the buyer or

contracting party of which the seller of goods or the provider of services is
my depositary (IPI and the taxes collected as a substitute
tax.

Calculation of Presumed Profit

The corporate income tax is levied on profits. Companies opting for

presumed profit must presume the profit earned in each quarter, and this presumption is
made by the application of profitability percentages dictated by law:

• Commerce and Industry: 8.0% (eight percent);

• resale, for consumption, of petroleum-derived fuel, ethyl alcohol
fuel and natural gas: 1.6% (one whole and six tenths percent);

• services in general: 32.0% (thirty-two percent);

• hospital services and cargo transportation: 8% (eight percent);
• other transportation services: 16% (sixteen percent); and

The monthly calculation base for the income tax of corporate service providers
of services in general, except for hospital and transportation services, as well as those
provided by service companies of legally recognized professions
regulated, whose annual gross revenue is up to R$ 120,000.00 (one hundred and twenty thousand)
reais), may be determined by applying the percentage of 16% on the
gross revenue earned monthly.

The legal entity that has used the reduced rate of 16.0%, whose revenue
accumulated brut until a certain month of the calendar year exceeds the limit of R$
120,000.00 will be subject to the payment of the difference in uncollected estimate,
accounted for in relation to each quarter elapsed, until the last business day of the month
subsequent to the one in which the excess occurs, without legal additions.

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Practical Table of Percentages - IRPJ

Reduced Percentages
ATIVIDADES Percentages Annual Revenue up to R$
120,000.00

Cargo transportation services 8.0

About the gross revenue of hospital services 8.0

About the gross revenue from contracted construction,

when there is employment of materials in any
8.0
quantity (Normative Declaratory Act COSIT No.
06/97

Land subdivision, real estate development and Activities that cannot

sale of properties built or acquired for 8.0 to benefit from the reduction
resale of percentage

Passenger transport services 16.0

Resale of petroleum-derived fuels and

1.6
alcohol, including gas

Service providers related to the exercise of

legally regulated professions, including schools 32.0
(S/C of the old regime of DL 2,397)

Business intermediation, including brokerage

(insurance, properties, among others) e as of 32.0 16.0
commercial representation

Administration, leasing or assignment of real estate, and

32.0 16.0
furniture.

Construction by administration or by contract

32.0 16.0
only from labor

Provision of printing services, with or without

supply of material, in relation to gross revenue 32.0 16.0
that does not arise from commercial or industrial activity

Provision of treated water supply services

sewage collection and highway exploitation through
32.0 16.0
toll collection (Declaratory Act COSIT No.
16/2000

Difference between the selling price and the purchase price

32.0 16.0
from used vehicles

The calculation of the presumed profit, for the purposes of CSLL, should be done by summing the
gross revenues earned or received in the quarter and apply the percentage of:

• 12%, in the case of commerce, industry, and the provision of hospital services,
transport and construction by contract using materials;

• 32%, in the case of service provisions not covered by the percentage of

12%.

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Other Income and Capital Gains

Having calculated the presumed profit, the company should add to this profit,
in full, the capital gains, income and net gains obtained in
financial applications, other revenues, and the positive results arising from
recipes no covered by activity acquired no quarter.

Calculation of Due Tax

The corporate income tax is calculated by applying the rate

of 15% (fifteen percent) on the calculation base (presumed profit plus others)
capital gains and income
It also incurs an additional income tax at a rate of 10% (ten for
cento) on the portion of the tax base (presumed profit plus other revenues and
capital gains) that exceed the value resulting from the multiplication of R$ 20,000.00 by
number of months of the assessment period, that is, R$ 60,000.00 when the period of
The accounting covers the three months of the quarter.
The company that chooses to advance the payments each month of the quarter
presumed profit, must leave the additional for the end of the quarter, under penalty of
incurring in overpayment, as the limit must be calculated on a quarterly basis.

The CSLL is calculated by applying the rate of 9% (nine percent) on the

tax base (presumed profit plus other income and capital gains)

Deductions of the Tax

The tax owed to the company may deduct:

• the tax paid or withheld at source on the income that constituted the base of
calculation;
• the credits, including the judicial ones with final judgment, related to the taxes and
contributions managed by the Federal Revenue, subject to declaration of
compensation;
• the negative balance of IRPJ and CSLL from previous quarters.

The negative balance of IRPJ and CSLL can be refunded or offset from
closing of the quarter, plus interest equivalent to the Selic reference rate
for federal titles, accumulated monthly, calculated from the following month
at the end of the reporting period until the month prior to the refund or
compensation and one percent relative to the month in which it is being
carried out.

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Collection of the Tax

The payment is made via DARF for IRPJ and CSLL or through electronic transmission.
of funds (ATMs or Home Bank), with codes 2089 and 2372, respectively.
The use of DARF for payment of taxes amounting to less than R$ is prohibited.
10.00 (ten reais). Thus, the tax assessed under a specific revenue code,
which, in the reporting period, results in less than R$ 10.00, must be added to
tax of the same code, corresponding to the subsequent periods, until the total
be equal to or greater than R$ 10.00 (ten reais), when, then, it will be paid or collected at
deadline established in the legislation for this last reporting period. The tax will be
payment in a single installment by the last business day of the month following the closure of the
assessment period.
Optionally, the tax calculated in each quarter may be paid in up to three installments.
monthly, equal and successive installments, in the minimum amount of R$ 1,000.00, due on
last business day of the three months following the end of the reporting period
to correspond to, observing:
• 1st installment (due in the specified month for the single installment): no charge;
• 2nd installment - interest of 1%;
• 3rd installment - previous month's SELIC plus 1%.

IRPJ and CSLL - CALCULATION BASED ON REAL PROFIT

The IRPJ and CSLL in actual profit are calculated on the income earned, which can be
considered as an increase in assets, so that the tax cannot apply to
mere income when they do not represent new wealth. Thus, the IR and the CSLL, in
in the case of companies, it should be based on profit.

Periodicity

The Real Profit has two periods: annual and quarterly, both for IRPJ,
how much for the CSLL.

As a rule, corporate income tax is payable quarterly.

based on actual profit. But the quarterly assessment can bring disadvantages to the
legal entity.

Calculation methods

The calculation of the IR and CSLL based on Actual Profit can be done in the following ways
forms:

• Real quarterly - always through quarterly balance;

• Real annual - through monthly estimates or through balance

suspension or reduction, and also with the determination of the Annual Actual Profit at the end of
reporting period.

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Quarterly Accounting

The calculation basis for the IRPJ and the CSLL will correspond to the net profit of the period.
(accounting profit), adjusted for additions, exclusions, and offsets determined and
authorized by Income Tax legislation.
It is that, because it is definitive, the quarterly assessment, depending on the seasonality of the
billing, or even the mismatch that is observed in some activities, between the
the realization of expenses and the entry of revenues can result in negative outcomes
in a certain quarter that will not automatically offset with results
positives from later quarters due to the so-called "lock" of 30% in
compensation of tax losses.
The assessment takes place on the dates of 03/31, 06/30, 09/30, and 12/31.
After the adjustment in profit, the rates of 15% for IRPJ and 9% for CSLL are
applied. If the profit exceeds R$ 60,000.00 in the quarter, the excess will be
the amount will still be taxed at 10% of IRPJ.

Annual Settlement

As we mentioned, taxation based on Annual Actual Profit implies calculations

monthly, whether through estimates, or even after balance sheets of reduction or suspension.
Next, we will see the general rules for performing these calculations.

The best way to calculate the income tax owed in each calendar year,
for companies not opting for presumed profit or required to determine profit
It is the annual assessment, with monthly collections calculated by estimate.
anticipation

This systematic approach, with monitored monthly estimates, also has the advantage of
allow the adjustment of the anticipations (estimates) calculated based on gross revenue and
increases, through monthly balance sheets or reports monitoring the results
during the current period, in addition to allowing the offset of losses incurred during
of the calendar year.
The final adjustment is made on December 31 of each year, or on the date of
termination of activities and in the events of incorporation, merger, or spin-off, by means of
calculation of actual profit.
The option for monthly estimated payments, with the determination of actual profit
annual, is made with the payment of the corresponding tax for the month of January of
annual calendar (up to the last business day of February) or with the respective survey
balance or suspension balance of the referred month. Even if the payment of
the estimate for the month of January was made after the due date
the option is valid. In the case of starting activities, the option will be expressed with the
payment of the tax corresponding to the first month of activity of the legal entity.
In the event of the initiation of a tax audit by the Federal Revenue Service before
legal entity opts for estimated monthly payments, provides for
Normative Instruction SRF No. 93/97 that the Tax Auditor must notify her to inform which
the method of income tax assessment that will be adopted for the current calendar year.
If the option informed to the Tax Auditor is annual real profit with collections
monthly by estimation, without the legal entity having prepared balance sheets or trial balances
monthly suspensions that justify the non-payment of the estimates for the year in

15
course, an Infraction Notice will be drawn up for the imposition of a fine of 75% (seventy-five
percent) on the unpaid amounts.
Under no circumstances will there be an official assessment of uncollected estimates.
Only the fine will be demanded separately.
When a loss occurs in the assessment, there will be no tax collection.

Definition of the Option

Article 232 of the RIR/2018 states that the option for the annual calculation of real profit,

characterized by the start of monthly estimated tax payments (art. 222,

The sole paragraph of the RIR/2018 is irrevocable for the entire calendar year.
That is, once this method of tax assessment is adopted, through the
respective payment under the relevant code, changing the option within is prohibited
of the same calendar year.
It should be noted that the start of monthly estimated tax payments implies the
mandatory annual calculation of actual profit, even if the legal entity does not
she was obligated to the actual profit system for another reason.

Calculation of the Monthly Estimate to be Collected

The estimated value of the IRPJ to be collected each month will be calculated
through the application of the rate of 15% (fifteen percent) on the tax base
estimated based on gross revenue and increases (calculation similar to that of Profit
Presumptuous).
The income tax additional is due monthly, at a rate of ten percent.
one hundred about the portion of the estimated calculation base, based on gross revenue, which
exceed R$ 20,000.00 (twenty thousand reais).
As for the CSLL, the amount of the estimate to be collected each month will be calculated
by applying the rate of 9% (nine percent) on the tax base
estimated based on gross revenue and increases.

Monthly Suspended or Reduced Balances

The payment of the IRPJ/CSLL monthly by estimate, relating to the month of January of
the annual calendar may be carried out based on a balance sheet or a reduction balance sheet,
since it is shown here that the tax due for the period is lower than the
calculated based on gross revenue and additions.
In the event of an assessment of tax loss in the balance sheet or suspended balance sheet, the
legal entity will be exempt from the payment of IRPJ/CSLL corresponding to this
month.
When the legal entity understands that the monthly payments by estimate,
calculated based on gross revenue and increases, will prove to be undue at the end of the
annual calendar, or that the amounts already collected up to the month exceed the amount that would be
based on the annual actual profit, you may:

16
 • suspend the monthly collection, as long as it demonstrates that the amount of tax
due, calculated based on the actual profit of the current period, is equal to or less than
sum of the income tax due, corresponding to the months of the same year
calendar, prior to that which refers to the balance sheet or balance statement prepared;
or

• reduce the tax amount to the positive difference between

the tax due in the current period, and the sum of income tax paid,
corresponding to the months of the same calendar year, prior to that to which it refers
refer to the balance sheet or trial balance drawn up.

In the case of monthly payment based on the result of the balance sheet or trial balance
accumulated, the additional 10% is applied to the calculation base (actual profit) that exceeds the
R$ 20,000.00 multiplied by the number of months covered by the balance sheet or financial statement.

Example:

Estimates, including additional, collected based on gross revenue:

a)R$ 15,000.00

b)February–R$ 20,000.00
2) The value of the estimate is additional, based on gross revenue and increases.
Regarding the month of March, to be collected by April 30, it would be R$ 30,000,000.

3) Raising a balance sheet or trial balance at the end of March,

understanding the results from January to March, it was found that the
income tax effectively due on actual profit, plus additional, in the period
amount of R$ 45,000.00.

4) So just reduce the collection for March to R$ 10,000.00.

It is clear that this monitoring report, drawn up at the end of March,

anticipates the effects of the adjustment balance to be raised in December, that is, in March
the company demonstrates that it would have settled all obligations for the current period.

This monitoring balance can be raised in all months, the

starting from January of the calendar year, so that each balance sheet or trial balance encompasses the
period from January to the month of your survey.
In the example, the first balance covered the period from January to March, the next
it would go from January to April, and so on.
Since these monitoring balances serve only to reduce or
suspend the monthly payment based on gross revenue, if, on the contrary, one of them
indicate an amount higher than the payment that should be made based on the revenue
brutally, this month, it may be disregarded in order to allow payment on
exact amount of tax levied on gross revenue.

Other situations may arise:

• balance or trial balance for January will show a loss. In this case, the person
the legal entity will not need to collect the estimate for January, and this situation may be
repeat in the following months. A situation that should always be demonstrated with
balances or accumulated trial balances, covering the period from January to the month
of monitoring; or

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 • balance or monthly trial balance of the monitoring shows that the collected amount, the
Estimated title, in the current period exceeds the due amount based on profit
really rushed from this balance or balance sheet. In this hypothesis, the difference
verified, corresponding to the tax collected in excess, cannot be used
to reduce the amount of tax owed by estimation in months
subsequent to the same calendar year. If the legal entity intends to
suspend or reduce the amount of tax owed, in any other month of
same calendar year, it must raise a new balance sheet or trial balance for the period in
course.

Requirements for Monitoring Balances or Statements of Estimates

The accounting result of these balances or balance sheets, prepared with observance
The provisions contained in commercial and tax laws must be adjusted by all
determined additions and exclusions and compensations allowed by tax legislation
of income, observing, including, the limit of 30% (thirty percent) in compensation
of losses from previous calendar years.
The balance sheet or trial balance, for the purpose of determining the result of the period in
course, will be transcribed in the book Diary until the due date for tax payment of
respective month, recorded in Part A of the Book of Calculation of Real Profit - LALUR,
the demonstration of the actual profit for the period covered by each balance sheet or trial balance. The

Part B of LALUR is used to control the utilization of losses.

The non-registration of the Diario Book and the Book of Real Profit Calculation (Lalur),
until the due date for payment of the respective month's tax, will imply the
disregard of the balance sheet or balance for the purpose of the suspension or reduction of
estimates collection.

Payment of the Annual Adjustment Balance

The income tax balance calculated on December 31 of the calendar year

must be paid in a single installment by the last business day of March of the year
subsequent, increased by interest equivalent to the SELIC rate, accumulated monthly,
calculated from February 1 until the month before the payment and one for
one hundred in the month of payment.

IRPJ and CSLL – Calculation based on Arbitrated Profit

The profit determination is a way of calculating the tax base.

of income used by the tax authority or by the taxpayer.

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 It is applicable by the tax authority when the legal entity fails to comply
the additional obligations related to the determination of actual or presumed profit, according to
the case.

The income tax based on arbitrated profit is determined for periods of

quarterly closings on March 31, June 30, September 30, and 31 of
December of each calendar year.

The income tax due quarterly will be determined based on the

criteria for arbitrated profit when (RIR/2018, art. 530):

• the bookkeeping that the taxpayer is obliged to reveal clear indications of

fraud or contain defects, errors, or deficiencies that render it unfit for:

a.identify the actual financial movement, including banking; or

b.determine the actual profit;

• the taxpayer fails to present the books and documents to the tax authority
of commercial and tax bookkeeping, or fail to present the Cash Book, in which
all financial transactions, including banking, must be recorded.
when choosing presumed profit and not maintaining regular accounting records;

• the taxpayer improperly opts for presumed profit;

• the commissioner or representative of the foreign legal entity fails to record

and to determine the profit from your activity separately from the profit of the client, resident
you are domiciled abroad;

• the taxpayer does not maintain, in good order and according to accounting standards
recommended, Ledger or sheets used to summarize, total, by account
the subaccount, the entries made in the Journal;

• if the taxpayer does not maintain bookkeeping in accordance with commercial and tax laws, or
stop preparing the financial statements required by tax legislation,
in cases where it is obligated to the actual profit.

Percentages of profit arbitration

Known gross revenue

As of 01.01.96, the arbitrated profit, when the gross revenue is known, will be
determined by the application of the defined percentages on itArt. 15 of Law No.
9,249/95, increased by 20%.

Thus, the profit will be assessed by applying the following percentages:

a) commerce and industry: 9.6%;

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b) resale, for consumption, of petroleum-derived fuel, ethyl alcohol fuel
and natural gas: 1.92%;

c) general services: 38.4%;

d) hospital services and cargo transportation: 9.6%;

e) other transportation services: 19.2%; and

f) financial institutions, brokerage firms for securities, securities and exchange,

distributors of securities and financial instruments, private insurance companies, entities
of open private pension and capitalization companies: 45%(Art. 16, paragraph
unique, of Law No. 9,249/95.

Known net revenue

The assessed profit, when the gross revenue is unknown, will be determined by
office, by using one of the following calculation alternatives:

a) 1.5 (one whole and five tenths) of the actual profit related to the last period in which
The legal entity maintained accounting in accordance with commercial and tax laws.
monetarily updated. When the actual profit results from an annual base period, the
the value that will serve as the basis for the arbitration will be proportional to the number of months of

base period considered.

0.04 (four hundredths) of the sum of the values of current assets, realizable in the long term
permanent deadline, existing in the latest known balance sheet, updated
monetarily, and multiplied by the number of months of the assessment period;

c) 0.07 (seven hundredths) of the capital value, including its monetary correction
accounted as capital reserve, as stated in the latest known balance sheet
or recorded in the acts of incorporation or amendment of the company, updated
monetarily, and multiplied by the number of months of the assessment period;

0.05 (five hundredths) of the value of the net equity stated in the last balance sheet.
known patrimony, updated monetarily, and multiplied by the number of months
of the reporting period;

e) 0.4 (four tenths) of the value of the goods purchases made each month of
reporting period;

f) 0.4 (four tenths) of the sum, each month, of the values of the payroll of
employees and the purchases of raw materials, intermediate products, and materials of
packaging;

g) 0.8 (eight tenths) of the total amount owed, each month during the period of
investigation, to employees;

h) 0.9 (nine tenths) of the rental value due for each month of the assessment period.

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Calculation of the tax owed

Tax rate

The corporate income tax is calculated by applying the rate.

of 15% (fifteen percent) on the calculation base (arbitrated profit plus other revenues)
the capital gains).

Additional

There is also an additional income tax at a rate of 10% (ten percent)

about the portion of the taxable base (arbitrated profit plus other revenues and gains
of capital) that exceeds the value resulting from the multiplication of R$ 20,000.00 by the number
of months of the reporting period, that is, R$ 60,000.00 when the reporting period
encompass the three months of the quarter.

Tax deductions

From the tax due based on the arbitrated profit, the company may deduct the
tax paid or withheld at source on the revenues that were included in the calculation base. In
the systematic of arbitrated profit prohibits any deduction for tax incentive purposes,
inclusive transportation vouchers or PAT (Worker's Food Program).

IPI–TAX ON MANUFACTURED PRODUCTS

The Tax on Industrialized Products - IPI is a non-cumulative tax,

should be calculated through assessment.

As a result, in summary, industrial establishments or those equivalent to

Industries are authorized to credit the amount of tax paid on inputs of
goods and inputs to offset with amounts owed on their taxed sales.

Regarding the taxpayers required to maintain tax records, the regime stands out.
Verification newspaper, which enables the effective application of the 'principle of non
cumulativity
Speed up and collect your tax regardless of being a headquarters or branch.

Industrialized product is the result of any defined operation.

noRIPI/2010as industrialization, even incomplete, partial or intermediate.

Characterizes industrialization any operation that modifies the nature, the

functioning, the finish, the presentation or the purpose of the product, or the
enhance for consumption, such as:

• that, exercised on raw material or intermediate product, is important in obtaining

of a new species (transformation);

• to what extent to modify, improve or, in any way, alter the

functioning, usage, finishing or appearance of the product (processing);

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• that consists of the gathering of products, parts, or pieces and results in a new one.
product or autonomous unit, even under the same tax classification (assembly);
• to what extent does it matter to change the presentation of the product, by placing the packaging,
even if in place of the original, unless the packaging placed is intended
only for the transportation of goods (packaging or repackaging);

• to which, exercised on used product or remaining part of deteriorated product

you unused, renew or restore the product for use (renewal or
refurbishment.

It is not considered industrialization:

• the preparation of food products, not packaged in packaging of

presentation:

in the residence of the preparer or in restaurants, bars, ice cream shops,

confectioneries, bakeries, small markets and similar, as long as the products are
intended for direct sale to consumers;

ii.in industrial kitchens, when intended for direct sale to corporations,

companies and other entities, for the consumption of their employees,
employees or managers;

• the preparation of soft drinks, based on concentrated extract, through machines,

automatic or not, in restaurants, bars and similar establishments, for sale
direct to consumer;

• the making or preparation of a handcrafted product.

• clothing manufacturing, by direct order from the consumer or user, in a workshop

or at the residence of the maker;

• the preparation of the product, by direct order of the consumer or user, at home
from the preparer or in the workshop, as long as, in any case, the prevailing one is the
professional work;

• the manipulation in pharmacy, for direct sale to consumers, of medications

official and magistral, upon prescription.

• the grinding of roasted coffee, carried out by a retail trader as an activity

accessory;

• the operation carried out outside the industrial establishment, consisting of the gathering of
products, parts or components resulting in:

i.buildings (houses, buildings, bridges, hangars, warehouses and similar, and

your covers);

ii.installation of pipelines, hydroelectric plants, cooling towers,

telephone stations and exchanges or other telecommunications systems and
telephony, stations, power plants, and electricity distribution networks
similar

iii.fixation of units or industrial complexes to the ground;

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• Attention: The provisions in this item do not exclude the incidence of the tax on the products,
parts or pieces used in the operations referred to therein.

• the assembly of glasses, according to prescription;

• the packaging of products classified in Chapters 16 to 22 of the TIPI,

acquired from third parties, in packaging made in the form of Christmas baskets and
similar;

• the repair, restoration, and refurbishment of used products, in cases where

that are intended for the use of the executing company itself or when these operations are
executed by order of third parties not established in the trade of such
products, as well as the preparation, by the repairer, restorer or reconditioner, of
parts or pieces used exclusively and specifically in those operations;

• the repair of products with manufacturing defects, including through replacement of

parts and pieces, when the operation is performed for free, even if by
dealers or representatives, by virtue of the warranty given by the manufacturer;

• the restoration of used bags, carried out by a rudimentary process, even if with
sewing machine jobs;

• the mixing of paints with each other, or with pigment concentrates, upon order of
consumer or user, conducted in a retail establishment, carried out by machine
automatic or manual, as long as the manufacturer and retailer are not companies
interdependent, controlling, controlled or affiliated.

• the operation that results in the products related to Subheading 2401.20 of the TIPI,
when exercised by a rural producer who is a natural person;

Concept of industrial establishment

An industrial establishment is one that performs any of the operations considered

industrialization, resulting in a taxable product, even if at a zero rate or exempt.

They are equated to industrial establishments:

• the establishments importing products of foreign origin, that give

exit to these products;

• the establishments, even if they are retail, that receive, for commercialization,
directly from the department that released them, products imported by another establishment
from the same company;

• the branches and other establishments that engage in the trade of products
imported, industrialized or sent to be industrialized by another establishment of
same taxpayer, except if those operate exclusively in retail sales and do not
are framed in the hypothesis of the previous item;

• the commercial establishments of products whose industrialization has been carried out
by another establishment of the same company or of a third party, through the shipment, by them
carried out, of raw materials, intermediates, packaging, containers, molds,
matrices or models;

• the commercial establishments of products of Chapter 22 of the TIPI, whose

industrialization has been commissioned to an industrial establishment, under a brand or

23
fantasy name of property of the client, of a third party or of the executor himself
from the order;

• the wholesale commercial establishments of the products classified in the positions

7101 to 7116 of TIPI;

• wholesalers and producer cooperatives that will provide to

alcoholic beverages and other products, of domestic production, classified in the positions
2204, 2205, 2206 and 2208 from TIPI and packaged in containers of capacity
exceeding the maximum limit allowed for retail sale, intended for the following
establishments (Law 9.493/1997, art. 3):

i.industries that use the mentioned products as input in

beverage manufacturing;

ii.wholesalers and producer cooperatives;

iii.bottlers of the same products.
• wholesalers that purchase from establishments
importers of products of foreign origin, classified in Positions 33.03 to
33.07 as the exchange rate;

• the establishments, wholesalers or retailers, that acquire products from

foreign origin, imported by order or on your own account, by
intermediate of an importing legal entity;

• the wholesale establishments of products of Position 87.03 of the TIPI;

• the wholesale commercial establishments of products classified in the Codes and

Positions 2106.90.10 Ex 02, 22.01, 22.02, except Ex 01 and Ex 02 of the Code
2202.90.00, and 22.03, of the TIPI, of national manufacture, subject to tax according to
general taxation regime referred to in article 222 ofRIPI/2010;

• the retail commercial establishments that acquire the products referred to

item XI, directly from an industrial establishment, or from a similar orderer in
form of item XIII;

• the commercial establishments of products referred to in item XI, whose

industrialization was commissioned by them to an industrial establishment, under
brand or trade name owned by the client, a third party, or itself
executor of the order;

• the wholesale commercial establishments of products classified in the Codes and

Positions 2106.90.10 Ex 02, 22.01, 22.02, except for Ex 01 and Ex 02 of the Code
2202.90.00, and 22.03, of the TIPI, of foreign origin, subject to the tax according to
general tax regime referred to in article 222 ofRIPI/2010;e

• the retail commercial establishments that acquire the products referred to in

item XIV, directly from the importing establishment.

Tax assessment

The taxpayer required to keep tax records must calculate the tax to be collected from
according to the regime in which it is framed. It is noted that, in addition to the Regime
In the Assessment Newspaper, the taxpayer may opt for the Unified Special Regime of

24
Collection of Taxes and Contributions owed by Microenterprises and Companies of
Small Size - Simple National, in termsfrom Complementary Law No. 123/2006.

In this case, the taxpayer opting for the Simplified System

must collect the tax monthly together with the other taxes and
contributions, as specified in the referred Complementary Law.

It is worth noting that the tax collection is done according to the rules of
Simples Nacional does not exclude the incidence of the tax due on customs clearance.
of products from foreign origin. In other words, concerning the IPI applicable to
importation of goods and services, the applicable legislation for other persons will be observed
legal.

Non-cumulative

As already mentioned, the IPI is a tax subject to the principle of non

cumulativity. This principle is provided for in the Federal Constitution of 1988.
(CF/1988), as well as in the IPI Regulation.

That is, according to constitutional rules, the IPI:

a) it will be selective, based on the essentiality of the product;

b) it will be non-cumulative, offsetting what is due in each operation with

the amount charged in the previous ones;

c) will not apply to industrialized products destined for export;

d) will have reduced its impact on the acquisition of capital goods by

taxpayer, in accordance with the law.

The IPI Regulation clearly states about the appropriation of credit.

Let's see:
Article 225.Non-cumulativity is implemented through the tax credit system.
related to products that entered the taxpayer's establishment, to be deducted from what
for due by the products that left him, in the same period, as established herein
Chapter (Law No. 5,172, of 1966, art. 49).

In this sense, the Regulation also clarifies that the right to credit is also
attributed to cancel the tax liability regarding products leaving the establishment
and returned or refunded to it.

Finally, the recorded amounts are also governed by the credit system.
incentive title, or cancellation of the respective Invoice before the exit of
merchandise, or still, tax difference due to rate reduction, in the
cases in which there has been an early launch.

PIS and COFINS

Contributions to the Social Integration Program and the Training Program

Public Servant Heritage (PIS/PASEP) and the Contribution for Financing the
Social Security (COFINS), which are under the responsibility of the Union, find their
legal foundation in the Federal Constitution in article 195 which states:

25
 Social security will be financed by the entire society, directly and
indirectly, in accordance with the law, through resources arising from the federal budgets,
of the States, the Federal District and the Municipalities, and of the following social contributions:

I - of the employer, the company, and the entity equivalent to it under the law,
incidents regarding: (Text given by Constitutional Amendment No. 20 of 1998)

a) the payroll and other work income paid or credited, to

any title, to the individual providing services to you, even without a link
employment; (Included by Constitutional Amendment No. 20, of 1998)

b) the revenue or the billing; (Included by Constitutional Amendment No. 20, of

1998

c) the profit; (Included by Constitutional Amendment No. 20, of 1998)...

Exemption / Non-Occurrence

Contributions do not apply to:

• export of goods abroad;

• sales to the exporting commercial company for the specific purpose of exporting;
• the revenue corresponding to sales of materials and equipment, as well as
from the provision of services resulting from these operations, performed directly to
Itaipu Binacional;

• the provision of services for individuals or legal entities residing or domiciled in

foreign, whose payment represents an influx of foreign exchange;

• of international transport of goods or passengers

Calculation Base of Contributions

The calculation base for contributions is the revenue, understood as the

gross revenue of the legal entity regardless of the type of activity it performs and the
accounting classification adopted for revenues, minus the allowed exclusions.
The decision of the Supreme Federal Court - STF, which deals with unconstitutionality
of § 1 of art. 3 of Law 9718 of 1998, which had increased the calculation base of
contribution to the PIS and COFINS only benefits the companies authors of the
extraordinary resources already judged, although the path for those who have actions
pendings, as well as the taxpayers who still intend to initiate action in the Judiciary
it must be successful. According to constitutional forecast, the Supreme Court may also
communicate to the Senate the decision, so that the Legislative body provides for the suspension of part
declared unconstitutional, and then, the provisions in the decision will apply to everyone.
We also remind that prior to Law 9.718, the tax base of
contributions included only the revenue of the legal entity, and, after the
referred law, became the gross revenue, much broader, understood as the
total revenues earned by the legal entity, regardless of the type of
activity performed by her and the accounting classification adopted for revenues.

26
 The revenue should be taken without the IPI and without deduction of the highlighted ICMS, which

integrates gross revenue.

When the company charges ICMS as a tax substitute, this amount does not integrate
the gross revenue.
Legal entities opting for presumed profit may adopt the regime of
box, for the purpose of determining the monthly calculation basis of PIS/Pasep and COFINS, since
who have also adopted this regime for quarterly assessment of IRPJ and CSLL.
Once the cash method is adopted, it is up to the legal entity:

• issue a legitimate tax document, upon the delivery of the asset or right or of the
conclusion of the service; and

• indicate, in the Cash book, in a detailed record, the tax document to which
correspond to each receipt.
The legal entity that maintains accounting records, in accordance with the legislation.
commercial, must control the receipts of its revenues in a specific account, in the
which, in each release, will indicate the tax document to which it corresponds
receipt.

Admitted Exclusions

For the purpose of determining the calculation basis for PIS/Pasep and COFINS, they can be
excluded or deducted from the gross revenue, when they have been included, the amounts:

• of canceled sales

• of unconditional discounts granted;

• of ICMS, when highlighted in the invoice and charged by the seller of the goods or
service provider in the capacity of tax substitute;
• the reversals of provisions (The exclusion does not apply in the case of provisions that
has been deducted from the calculation base at the time of its constitution);

• the recoveries of credits written off as losses, limited to the amounts

effectively reduced, which do not represent the entry of new revenues;

• two positive results from the investment evaluation based on the value of the assets
liquid and from the profits and dividends derived from investments valued at cost
of acquisition, which have been accounted as revenue, including derivatives
of the undertaking object of a Silent Partnership (SCP);

• the revenue arising from the sale of fixed asset goods.

PIS and COFINS rates

The PIS and COFINS rates for legal entities or for revenues
included in the 'cumulativity' system are:

a) 0.65% for PIS/PASEP; and

b) 3% for the COFINS.

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 The rates of PIS and COFINS for legal entities or for revenues
inserted in the systematics of 'non-cumulativity' are:

a) 1.65% (one whole and sixty-five hundredths percent) for the PIS/PASEP; and

b) 7.6% (seven point six percent) for the COFINS.

Credits of PIS/PASEP and COFINS 'Non-Cumulative'

Although the title of this type of contribution suggests the implementation of non-
cumulativity, this institute was not adopted in its entirety, as Law No.
10.637/2002 and No. 10.833/2003 preferred the technique of listing the operations that generate and
as that do not generate the right to credit.
As a general rule, the right to the credit of PIS/PASEP and COFINS arises with the
acquisition, each month, of goods and services that, in the previous phase of the production chain
or commercialization, were subject to the same contributions and whose sales revenue or
of resale integrate the calculation base of PIS/PASEP and COFINS 'non-cumulative'.
For the calculation of the non-cumulative PIS/PASEP and COFINS, it may be
discounted credits calculated in relation to:

• goods acquired for resale;

• goods and services, used as inputs in the provision of services and in production
or manufacturing of goods or products intended for sale, including fuels and
lubricants, except in relation to the payment referred to in Article 2 of the Law No
10.485, of July 3, 2002, due by the manufacturer or importer, to
dealer, through the intermediation or delivery of the classified vehicles in
positions 87.03 and 87.04 of the TIPI; (Text given by Law No. 10.865, of 2004)

• electric energy and thermal energy, including in the form of steam, consumed
in the establishments of the legal entity; (Text amended by Law no. 11,488, of 15
June 2007

• rental of buildings, machines and equipment, paid to legal entities, used

in the company's activities;

• value of the consideration for lease operations by individuals

legal, except for those opting for the Simples ( wording given by Law No. 10.865, of
2004);

• machines, equipment, and other assets incorporated into fixed assets,

acquired or manufactured for rental to third parties, or for use in production
of goods intended for sale or the provision of services; (Text amended by the Law
No. 11,196, of 2005

• buildings and improvements on properties owned or of third parties, used in the

company activities;

• returns received for which the sales revenue has been included in billing
of the month or of the previous month, and taxed according to the provisions of this Law;

• storage of goods and freight in the sale operation, in the cases of the incisions
I and II, when the burden is borne by the seller.

• of depreciation and amortization charges for machinery, equipment, and others

assets incorporated into fixed assets, acquired or manufactured for lease to

28
 third parties, or for use in the production of goods intended for sale or in
provision of services, as well as the buildings and improvements on properties
own or third-party, used in the company's activities;
The amount will not give the right to credit: (Wording given by Law No. 10,865, of 2004)

• of paid labor to the individual; and (Included by Law No. 10,865, of 2004)
• from the acquisition of goods or services not subject to the payment of the contribution,
including in the case of exemption, this last one when resold or used as
input in products or services subject to a rate of 0 (zero), exempt or not
achieved by the contribution; (Included by Law No. 10,865 of 2004)

• The IPI incurred on acquisition, when recoverable by the buyer.

The right to credit applies exclusively in relation to:

• for the goods and services acquired from a legal entity domiciled in the Country;
• to the costs and expenses incurred, paid, or credited to the legal entity
domiciled in the Country;

The unused credit in a certain month may be used in the following months.
subsequent. In the event that the legal entity is subject to non-cumulative incidence
of COFINS, concerning only the part of its revenues, the credit will be calculated,
exclusively, regarding the costs, expenses, and charges related to these revenues.
The COFINS credit related to goods purchased for resale must be reversed.
used as inputs in the provision of services and in the production or manufacturing of
goods or products intended for sale that have been stolen or robbed,
unused or deteriorated, destroyed in an incident or, still, used in others
products that have had the same destination. (Included by Law No. 10,865, of 2004)
Optionally, the taxpayer may calculate the credit related to the acquisition of
machines and equipment intended for fixed assets, within a period of 4 (four) years,
through the application, each month, of the applicable rates on the corresponding value to
1/48 (one forty-eighth) of the acquisition value of the asset, according to
regulation of the Federal Revenue Secretariat. (Included by Law No. 10,865 of 2004)

The road freight transport service company that subcontracted service

cargo transportation provided by: (Included by Law No. 11,051, of 2004)

a) individual person, independent carrier, may deduct from the Cofins owed
in each reporting period, presumed credit calculated on the value of
payments made for these services; (Included by Law No. 11,051 of
2004

b) legal entity carrier, opting for SIMPLES, may discount,

of Cofins due in each assessment period, credit calculated on the amount
of the payments made for these services. (Included by Law No. 11,051,
from 2004)

Regarding credits for road transport service companies

of load that subcontracting cargo transportation service, its amount will be
determined by application, on the value of the mentioned payments, of
rate corresponding to 75% of the standard rate of non-cumulativity. (Included by
Law No. 11,051, of 2004

29
Collection

Contributions to PIS/Pasep and COFINS must be paid, in a manner

centralized at the headquarters, until the twenty-fifth day of the month following the month of
occurrence of the triggering facts (MP 447/2008). In practice, every 25th, as it
if this day falls on a Saturday, Sunday, or holiday, the due date is advanced to the day
immediately previous useful.

Systematic of investigation

With the advent of Laws 10.637/2002 and 10.833/2003, the calculation system of
PIS and COFINS have become, as a general rule, in the non-cumulative modality. However,
remain subject to the rules of the PIS/Pasep and COFINS legislation in force
previously the laws that govern non-cumulativity:

• legal entities taxed on income tax based on profit

presumed or arbitrated;

• the legal entities opting for SIMPLES;

• legal entities exempt from taxes;
• the public bodies, autarchies, and federal, state public foundations
municipalities, and the foundations whose creation has been authorized by law, referred to in
art. 61 of the Transitional Provisions of the Constitution;

• cooperative societies, except for agricultural production, without prejudice to

deductions referred to in article 15 of Provisional Measure No. 2.158-35, of 24 of
August 2001, and Article 17 of Law No. 10,684, of May 30, 2003, does not apply to them
applying the provisions of § 7 of art. 3 of Laws no. 10,637, of 30 of
December 2002, and 10.833, of December 29, 2003, and those of consumption;
(Text provided by Law No. 10,865, of 2004)

• the revenues arising from operations:

subject to the substitution of PIS and COFINS tax;

b) referred to in art. 5 of Law No. 9,716, of November 26, 1998 (sale of

used motor vehicles;

• revenues arising from the provision of telecommunications services;

• the income from the sale of newspapers and periodicals and from the provision of
services of journalistic and broadcasting companies of sound and images;
(Text given by Law No. 10,865, of 2004)

• the revenues submitted to the special tax regime provided for in Article 47 of the Law
no 10,637, of December 30, 2002 (wholesale electricity market);

• the revenues related to contracts signed before October 31, 2003:

a) with a term of more than 1 (one) year, from plan administrators
consortia of movable and immovable property, regularly authorized to operate
by the Central Bank;

30
 b) with a term exceeding 1 (one) year, construction by contract or of
supply, at a predetermined price, of goods or services;

c) for construction by contract or supply, at a predetermined price,

of goods or services contracted with a legal entity of public law,
public company, mixed economy company or its subsidiaries, well
how contracts subsequently signed arise from proposals
presented, in the bidding process, by that date;

• the revenues resulting from the provision of road collective transport services,
passenger metro, rail, and waterway

• the revenues from services: (Worded by Law No. 10,865, of 2004)

a) provided by hospital, emergency room, medical clinic, dental clinic, of
physiotherapy and speech therapy, and pathology laboratory,
cytological or clinical analyses; and (Included by Law No. 10.865, of 2004)

b) dialysis, X-rays, radiodiagnosis and radiotherapy, chemotherapy and

blood bank; (Included by Law No. 10,865, of 2004)

• the revenues from the provision of early childhood education services, teaching
fundamental and secondary education and higher education.

• the revenues from the provision of collective transportation services of

passengers, carried by regular domestic airline companies, and the
resulting from the provision of passenger transport services by companies
air taxi; (Included by Law No. 10,865, of 2004)

• the income earned by legal entities, resulting from the publication of periodicals and
of information contained therein, which relate to the subscribers of the services
telecommunications public; (Included by Law No. 10.865, of 2004)

• the revenues from the provision of services by call center companies,

telemarketing, debt collection, and telecustomer service in general; (Included by Law No.
10.865, of 2004
• the revenues resulting from execution by administration, contracting or subcontracting
construction works contract until December 31, 2010; (Text revision
given by MP 451 of 2008)

• the revenues earned by theme parks, and those derived from services of
hospitality and organization of fairs and events, as defined in a joint act
of the Ministries of Finance and Tourism. (Included by Law No. 10,865, of 2004)

• the revenues from the provision of postal and telegraphic services provided
by the Brazilian Post and Telegraph Company; (Included by Law No. 10,925, of
2004

• the revenues from the provision of public services by concessionaires

highway operators; (Included by Law No. 10,925, of 2004)

• the revenues arising from the provision of services by travel agencies and
travel and tourism. (Included by Law No. 10,925 of 2004)

• the revenue earned by information technology service companies, resulting from the
software development activities and their licensing or assignment of
right of use, as well as analysis, programming, installation, configuration,
advisory, consulting, technical support and maintenance or software update

31
 understood as software, the web pages. (Included by Law No.
11.051, of 2004

• the revenues related to real estate resale activities, subdivision or

land subdivision, real estate development and construction of a building intended
for sale, when arising from long-term contracts signed before December 31
October 2003; (Included by Law No. 11,196, of 11/21/2005)

SIMPLE NATIONAL

The Simples Nacional is a differentiated, simplified, and favorable tax regime.

provided for in Complementary Law No. 123, of December 14, 2006, applicable to Microenterprises and
Small Businesses, as of 01.07.2007. The mentioned Complementary Law
establishes general norms regarding Microenterprises and Small Enterprises within the scope
two Powers of the Union, the States, the Federal District, and the Municipalities, encompassing,
not only the differentiated tax regime (Simples Nacional), but also aspects
related to public bidding, labor relations, the encouragement of credit, to
capitalization and innovation, access to justice, among others.

Definition of Micro Enterprise (ME) and Small Business (EPP)

It is considered an ME, for the purpose of Simples Nacional, the entrepreneur, the person
legal entity, or equivalent, that earns gross revenue equal to or in each calendar year,
less than R$ 360,000.00. It is considered a Microenterprise (EPP), for the purposes of the Simples Nacional,

entrepreneurs, the legal entity, or those treated as such, who earn, in each calendar year,
gross revenue greater than R$ 360,000.00 and equal to or less than R$ 4,800,000.00. For purposes
of fitting into the condition of ME or EPP, the sum of must be considered
revenues from all establishments. All States and Municipalities participate
mandatory of the Simples Nacional. However, depending on the participation of each
State in the Brazilian Gross Domestic Product (GDP) can be adopted by the States
differentiated limits of gross revenue for Micro and Small Enterprises (sub-limits), for the purpose of collection

of ICMS or of ISS, whereby the municipalities must necessarily adopt the

sublimes of the States.
It is emphasized that for the purpose of fitting into the Simples Nacional, as well as
for the collection of federal taxes, the limit is always R$ 4,800,000.00. Thus,
if a company in the state of Ceará obtains a gross revenue in the calendar year
above R$ 3,600,000.00, it will collect taxes through the Simples Nacional
federal, required to collect the ICMS for the State and/or the ISS for the Municipality.

Covered taxes

• Corporate Income Tax (IRPJ);

• Tax on Industrialized Products (IPI);

32
 • Social Contribution on Net Income (CSLL);
• Contribution to the Financing of Social Security (COFINS);
• Contribution to PIS/Pasep;
• Contribution to Social Security (employer's quota - in some cases);
• Tax on Transactions Related to the Circulation of Goods and On
Provision of Interstate and Intermunicipal Transport Services and of
Communication (ICMS);
• Tax on Services of Any Nature (ISS).

It is worth noting that the first paragraph of Article 13 of LC 123/2006 states that
the ICMS due on operations is not covered by the Simples Nacional:

• in operations or services subject to the tax substitution regime;

• for the third, that the taxpayer is obliged to, by force of legislation
state or district in force;

• at the entry, in the territory of the State or the Federal District, of petroleum, including
liquid and gaseous lubricants and fuels derived from it, as well as energy
electric, when not intended for commercialization or industrialization;

• on the occasion of customs clearance;

• in the acquisition or maintenance in stock of uncovered goods
tax document;

• in the operation or provision uncovered by a tax document;

• in operations with goods subject to the anticipation regime of the
collection of the tax, as well as the amount related to the difference between the rate
internal and interstate, in purchases in other States and the Federal District, in
terms of state or district legislation;

It is also not covered by Simples Nacional, according to legislation.

aforementioned or ISS due:

• in relation to services subject to tax substitution or withholding at source;

• in the importation of services;

Gross Revenue

Gross revenue is considered the product of the sale of goods and services in operations.
on their own account, the price of the services provided and the result from account operations
excluding canceled sales and unconditional discounts granted.
For the purposes of classification as a Microenterprise and Small Business,
gross revenue must be considered in each calendar year. For purposes of
determination of the general rate, the total gross revenue accumulated in must be taken into account
12 months prior to the assessment period.

For the legal entity that starts activities in the same calendar year of the option, the
limits for the ME and for the EPP will be proportional to the number of months covered

33
between the beginning of the activity and the end of the respective calendar year, considering the fractions
of months like a full month. That is, the limits for ME and EPP will be,
respectively, R$ 30,000.00 and R$ 400,000.00 multiplied by the number of
months included between the beginning of the activity and the end of the respective calendar year,
considered as fractions of months as a whole month.

Calculation

• How the ME and EPP will have to calculate the amount due in
Simple National?

Complementary Law No. 123, of 2006, establishes that a system must be made available.
electronic tool for the simplified calculation of the monthly value of Simples Nacional.

• In which Annex should I tax the activities carried out by ME and EPP?

The activities of reselling goods are taxed under Annex I of Complementary Law 123.
from 2006.

The activities of selling industrialized products by the taxpayer are

taxed by Annex II of Law 123, of 2006.

The activities of providing services in general by the taxpayer are taxed.

by Annex III of LC 123, of 2006.

The activities of providing services with the transfer of labor by

taxpayers are taxed under Annex IV of LC 123, of 2006.

The activities of providing intellectual services by the taxpayer are

taxed by Annex V of Complementary Law 123, of 2006.

In summary, the amount owed monthly by Micro Enterprises (ME) and Small Businesses (EPP) opting for

Simples Nacional is determined by calculating the effective tax rate, based on the
application of the tables from the Annexes of Complementary Law No. 123 of 2006. Let's explain
step by step.
The passive subject will use the gross revenue accumulated over the 12 (twelve) months
prior to the assessment period (RBT12). It should not be confused with Gross Revenue
Accumulated (RBA) from January until the reporting period, which serves to identify whether the
the company exceeded the maximum annual gross revenue limit to be a microenterprise.
consequently, remain in the Simples Nacional. For example, considering that the period
The assessment period (PA) is July 2018, and its RBT12 is the sum of the gross revenue from July 2017 to

June/2018, while its RBA is the sum of gross revenue from January/2018 to July/2018.

Known as RBT12, it is consulted in the Annex in which they must be taxed

revenues, the range of gross revenue to which it belongs. And, once the revenue range is identified
brute, one discovers the nominal rate and the amount to be deducted. For example: knowing that the
The RBT12 of a certain company is R$ 825,000.00, it can be seen that, in the Annexes, this amount
is within the gross revenue range of R$ 720,000.01 to R$ 1,800,000.00. If the
income taxed under Annex II, this bracket corresponds to the nominal rate of 11.20%
and the deductible amount of R$ 22,500.00.

Knowing RBT12, the nominal rate and the deductible amount, the rate is calculated.
effective, which is the result of: [(RBT12 × nominal rate) – amount to be deducted] / RBT12.

34
 The amount due monthly, to be collected by the ME or EPP, will be the result of
of the application of the effective rate on the monthly gross revenue earned (regime of
competence) or received (cash basis), according to the option made by the taxpayer.

But the taxpayer doesn't need to worry about doing this whole calculation, which will be
carried out by PGDAS-D 2018.

LET'S SEE a very simple example, just to explain the procedure.

More complex examples can be found in the application manual. The company
XYZ ME, opted for Simples Nacional, obtained gross revenue resulting exclusively
from the resale of goods in the domestic market (Annex I) not subject to substitution
tax. The company has no branches.

Restrictions on entry into the Simples Nacional

They will not be able to collect taxes and contributions in the form of the Simples Nacional to
microenterprise or small business:

• that explores cumulative and continuous service provision of

credit advisory, credit management, selection and risks, account administration
to pay and to receive, asset management, purchases of
credit rights resulting from installment sales of goods or services
services (factoring);

• that has a partner residing abroad;

• of which capital is participated by an entity of direct or indirect public administration,
federal, state or municipal;

• who has debts with the National Institute of Social Security - INSS, or with the
Federal, State or Municipal Public Treasuries, whose enforceability is not
suspense

• that provides intermunicipal and interstate passenger transport services;

• whether it is a generator, transmitter, distributor or marketer of energy
electric

• that engages in the importation or manufacturing of automobiles and motorcycles;

• that engages in the activity of importing fuels;
• that engages in production or wholesale sales of:
a) cigarettes, cigarillos, cigars, cigarette filters, firearms, ammunition and
powders, explosives, and detonators;

b) beverages described below:

1 - alcoholic;

2 - soft drinks, including flavored carbonated waters;

• that carries out the assignment or leasing of labor;

• that is dedicated to land subdivision and property development.

35
 • that carries out the activity of renting its own properties, except when referring to
provision of services taxed by the ISS.

Impeditive Activities

The Management Committee of the Simples Nacional (CGSN) informs in its Resolution No.
140/2018, Annex VI what activities are prohibited from migrating to SIMPLES
NATIONAL.

If the company has more than one activity and at least one of them is
related to those that are prohibitive, such a company will not be able to be an option of
National Simple.

GENERAL ASPECTS OF ICMS

The ICMS in the Federal Constitution of 1988 - according to article 155, item II, of the
CF/1988, only the States and the Federal District have exclusive tax jurisdiction.
to establish the Tax on Transactions related to the Circulation of Goods and on
Interstate and Intermunicipal Transport and Communication Service Renderings
ICMS, even if the operations and services begin abroad.

Main regulations related to the Tax Legislation of ICMS - Complementary Law

87, of September 13, 1996, and its subsequent amendments, which established norms
general laws aimed at regulating, throughout the Country, the institution of ICMS, as defined
in item XII, of art. 155 of the CF/88. The Law 12,670, of December 27, 1996, and its
subsequent changes, established to adjust the State's taxation system
From Ceará to the rules of the mentioned Law Complementary.

Federal Constitution of 1988

Article 155. It is the responsibility of the States and the Federal District to impose taxes on:

I - transmission due to death and donation of any assets or rights;

II - operations related to the circulation of goods and on the provision of services

interstate and intercity transport and communication, even if the operations and the
installments start abroad;

III - ownership of motor vehicles.

§ 1. The tax provided for in item I:

I - regarding real estate and respective rights, it is the responsibility of the State of the situation
of good, or to the Federal District

II - regarding movable property, titles, and credits, it is the responsibility of the State where it

process the inventory or listing, or if the donor has domicile, or to the District
Federal;
III - will have the authority for its establishment regulated by complementary law:

36
a) if the donor has a domicile or residence abroad;
b) whether the deceased owned assets, was a resident or domiciled, or had their estate inventory
processed abroad;

IV - its maximum rates will be set by the Federal Senate;

§ 2. The tax provided for in item II shall comply with the following:

It will be non-cumulative, compensating what is due in each operation related to

circulation of goods or provision of services with the amount charged in the
previous ones by the same or another State or by the Federal District;

II - exemption or non-occurrence, unless otherwise determined by legislation:

a) will not imply credit for offsetting with the amount due in the operations or
following installments;
will result in the cancellation of the credit related to previous operations;

III - it may be selective, depending on the essentiality of goods and services;

IV - resolution of the Federal Senate, initiated by the President of the Republic or by a

one third of the Senators, approved by the absolute majority of its members, will establish the
applicable rates to interstate operations and services, and export;
V - it is granted to the Federal Senate:

a) establish minimum rates for internal operations, by means of resolution of

initiative of a third and approved by the absolute majority of its members;

b) set maximum rates for the same operations to resolve specific conflicts that
involve the interest of States, by resolution of an initiative by the absolute majority and
approved by two-thirds of its members;

VI - unless otherwise decided by the States and the Federal District, in accordance with
provided in item XII, 'g', the internal rates, in operations related to the circulation of
goods and services provided shall not be lower than those anticipated for the
interstate operations;

VII - in relation to operations and services that provide goods and services to consumers
final located in another State, will be adopted:

a) the interstate rate, when the recipient is a taxpayer of the tax;

b) the internal rate, when the recipient is not a taxpayer of it;

VIII - in the case of item "a" of the previous section, it shall be the responsibility of the State where the
recipient the tax corresponding to the difference between the internal rate and the
interstate

IX - will also apply:

a) regarding the entry of goods or merchandise imported from abroad by an individual or

legal, even if it is not a habitual taxpayer of the tax, whatever it may be.
purpose, as well as regarding the service provided abroad, the tax being applicable to
State where the domicile or establishment of the recipient is located.
merchandise, good or service;

b) on the total value of the operation when goods are provided with services
not understood in the tax competence of the Municipalities;

X - will not apply:

37
a) about operations that send goods abroad, nor about services
loaned to recipients abroad, ensuring the maintenance and utilization of the
amount of tax charged on previous operations and services;

b) regarding operations that send oil, including lubricants, to other States,

liquid and gaseous fuels derived from it, and electric energy;

c) on gold, in the hypotheses defined in art. 153, § 5;

d) in the provision of communication services in the forms of sound broadcasting and

of sounds and images of free and unrestricted reception;

XI - will not include, in its calculation base, the amount of the tax on products
industrialized, when the operation, carried out between taxpayers and related to the product
intended for industrialization or commercialization, constitutes the generating fact of both
taxes
XII - it is up to complementary law:

a) define your contributors;

b) provide for tax substitution;

c) regulate the compensation regime of the tax;

d) set, for the purpose of its collection and definition of the responsible establishment, the location
the operations related to the circulation of goods and the provision of services;

e) exclude from the tax incidence on exports abroad, services and others
products beyond those mentioned in paragraph X, "a"

f) anticipate cases of credit maintenance, regarding the transfer to another state and
export to foreign countries, of services and goods;

g) regular how, through deliberation of the States and the Federal District,
Exemptions, incentives, and tax benefits will be granted and revoked.

h) define the fuels and lubricants on which the tax will be applied only once,
whatever your purpose may be, a situation in which the provisions of the item will not apply.
X, b;
i) establish the tax base in such a way that the amount of the tax to be included, also in
importation from abroad of goods, merchandise, or services.

§ 3rd Except for the taxes referred to in item II of the caput of this article and in art. 153,
I and II, no other taxes may apply to operations related to electricity.
telecommunication services, petroleum derivatives, fuels and minerals of the Country.

§ 4 In the case of item XII, h, the following shall be observed:

In the operations with lubricants and fuel derived from petroleum, the tax
it will be up to the State where the consumption occurs;

II - in interstate operations, between taxpayers, with natural gas and its derivatives,
the lubricants and fuels not included in item I of this paragraph, the tax will be
distributed between the states of origin and destination, maintaining the same
proportionality that occurs in operations with other goods;

III - in interstate operations with natural gas and its derivatives, and lubricants and
fuels not included in subsection I of this paragraph, intended for non-taxpayers, the
the tax will be the responsibility of the state of origin;

38
IV - the tax rates will be defined by deliberation of the States and District
Federal, in accordance with § 2, XII, g, observing the following:

a) they will be uniform throughout the national territory, but may be differentiated by product;

b) may be specific, by adopted unit of measure, or ad valorem, applying

about the value of the operation or about the price that the product or its similar would reach in
a sale under conditions of free competition;

c) may be reduced and restored, not being subject to the provisions of Article 150,
III, b.
§ 5 The rules necessary for the application of the provisions in § 4, including those related to
sorting and the allocation of the tax will be established by resolution of
States and the Federal District, under the terms of § 2, XII, g.

Section 6 The tax provided for in item III:

I - there will be minimum rates set by the Federal Senate;

II - may have differentiated rates according to the type and use.

Tax on Services of Any Kind (ISSQN)

The ISS, a municipal tax, presents numerous examples of

cumulative billing. Cumulativity occurs when the service is provided to another
the company is also a service provider. Thus, if a construction company
whether it builds or renovates a hospital, or if a decoration company decorates a hotel, the
The service user bears the burden of the tax stated on the invoice. There is no permission.
for the utilization of the tax and for the reduction of the ISS due by the hospital or
by the hotel.

Applicable legislation

• National Tax Code (NTC)

• Federal Complementary Law 116/2003 and its subsequent amendments
• Tax Code of the Municipality
• Regulation of ISSQN of the municipality

Tax Trigger of ISSQN

By constitutional determination, the generating event of any tax must be

determined by complementary law. Regarding the ISSQN, the legal situation in which
The obligation to pay the service tax is addressed in Article 1 of the Law.
National Complementary Law No. 116/2003, in the following terms:

Article 1 - The Tax on Services of Any Nature, under the authority of

Municipalities and the Federal District, have as the generating fact the provision of
services listed in the attached list, even if they do not constitute as
predominant activity of the provider.

39
 Paragraph 1 - The tax also applies to services originating from abroad.
Country or whose service has begun abroad.
§ 2 - Except for the exceptions expressly listed in the attached list, the services therein

mentioned are not subject to the Tax on Operations Related to

Circulation of Goods and Provision of Transport Services
Interstate and Intermunicipal Tax on Communication - ICMS, even if its
performance involves the supply of goods.

§ 3º - The tax referred to in this Complementary Law also applies to the

services provided through the use of public goods and services
economically explored through authorization, permission, or concession,
with the payment of a fee, price or toll by the end user of the service.
§ 4 - The incidence of the tax does not depend on the designation given to the service
Loaned.

Therefore, the taxable event for the tax on services of any nature is the
provision of services listed in the annex to the law that established the tax
or in the amending law of the original, regardless of the nature of the person who it
exercise or the denomination given to the service and also, regardless of whether it is the provision of the

service is the predominant activity of the provider.

List of Services

The analysis of the occurrence of the incidence hypothesis of ISSQN must be

complemented the study of the List of Services, as it is the one that describes the services that
can be achieved by tax. The List of Services complements the article that the
prescribes the taxable event of the tax. Only in this way will it be possible to know if a certain
service provision generates the obligation to pay the ISSQN or if it is a taxable event of the
ICMS, another tax or not, is not attainable by any other tax.

Below is the list of services attached to Complementary Law No. 116/2003 without its
respective sub-divisions:

1 - Computer services and related services.

2 - Research and development services of any kind.

3 - Services provided through rental, transfer of usage rights and similar agreements.

4 - Health services, medical assistance, and related services.

5 - Veterinary medicine and assistance services and similar.

6 - Personal care, aesthetics, physical activities, and similar services.

7 - Services related to engineering, architecture, geology, urban planning, civil construction,

maintenance, cleaning, environment, sanitation and similar.

8 - Education services, teaching, pedagogical and educational guidance, instruction,

training and personal evaluation of any degree or nature.

9 - Services related to accommodation, tourism, travel, and similar.

10 - Intermediation services and related services.

11 - Guard, parking, storage, surveillance services and similar.

12 - Services of entertainment, leisure, recreation, and similar.

40
13 - Services related to phonography, photography, cinematography, and reprography.

14 - Services related to third-party goods.

15 - Services related to the banking or financial sector, including those provided

by financial institutions authorized to operate by the Union or by those who
law.

16 - Municipal transport services.

17 - Technical, administrative, legal, accounting, commercial, and related support services.

18 - Services for claims regulation related to insurance contracts; inspection and

risk assessment for insurance contract coverage; prevention and management
of insurable risks and similar.

19 - Services for the distribution and sale of tickets and other lottery products, bingos,
cards, bets or raffle coupons, draws, prizes, including those resulting from
capitalization titles and related products.

20 - Port services, airport services, rail port services, road terminal services,
railway and metro workers.

21 - Public, registry, and notary services.

22 - Highway operation services.

23 - Programming and visual communication services, industrial design and related services.

24 - Locksmith services, stamp making, signs, visual signage, banners,

adhesives and similar products.

25 - Funeral services.

26 - Collection, shipping, or delivery services for correspondence, documents, objects,

goods or values, including through the post office and its franchised agencies; courier and
congeners.

27 - Social assistance services.

28 - Valuation services for goods and services of any nature.

29 - Library services.

30 - Biology, biotechnology and chemistry services.

31 - Technical services in buildings, electronics, electrotechnics, mechanics,

telecommunications and related fields.

32 - Technical drawing services.

33 - Customs clearance services, commissioners, dispatchers and similar.

34 - Services of private investigations, detectives, and similar.

35 - Reporting services, press advisory, journalism, and public relations.

36 - Meteorological services.

37 - Services of artists, athletes, models, and mannequins.

38 - Museum services.
39 - Services of goldsmithing and stone cutting.

40 - Services related to custom artworks.

41
Location of Incidence of ISSQN

Another element that needs to be considered when examining the generating fact of the
ISSQN is the location of the incidence of the tax (spatial element of the taxable event), for
to be able to know where the generating event occurred and to whom the obligation is owed, that is, to which

The active subject (municipality) must pay the tax.

As a general rule, the ISSQN is due at the establishment or domicile of the service provider.
of the service. However, Article 3 of Federal Law 116/2003 provides exceptions to this rule,
citing services for which the ISSQN is due at the place of provision. We can cite as
main exceptions are the services of:

• Installation of structures;

• Execution of civil construction works;

• Monitoring and oversight of the execution of engineering and architecture works

the urbanism;

• Cleaning, maintenance, and conservation of streets and public places, buildings,

chimneys, swimming pools, parks, gardens and the like;

• Surveillance, security or monitoring of property and people;

• Storage, deposit, loading, unloading, arranging, and safekeeping of goods

any species;

• Theatrical shows, circus performances, and film screenings;

• Shows, ballet, dances, parades, balls, operas, concerts, recitals, festivals and
congeners;

• Where the transport is being executed, in the case of transport services of

municipal nature;

• Provision of labor, even on a temporary basis, including

employees or workers, casual or temporary, hired by
service provider;

• Port services, airport services, rail port services, bus terminal services,
railway and subway workers;

Passive Subject

In the CTN, the passive subject of the main obligation is the person obliged to
payment of the tax. This can be considered a taxpayer when it is the person who
practice the tax fact and responsible when there is a connection with the tax fact and the law
forces to pay the tax.

Responsible/Substituted Contributor

The ISSQN taxpayer in LC No. 116/2003 is addressed in its article 5, as

being the service provider.

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 The LC No. 116/2003, seeking to remove any doubt regarding the possibility of
does not transfer to third parties the responsibility for the payment of the tax,
reproduced, with minor modifications, in its article 6, the provisions of article 128 of
CTN, in the following terms: "The Municipalities and the Federal District, by law, may
expressly assign the responsibility for the tax liability to a third party,
linked to the generating fact of the respective obligation, excluding the responsibility of the
taxpayer or assigning it to them on a supplementary basis for total or partial compliance
of the referred obligation, including with respect to the fine and legal additions.

Calculation Base

Complementary Law No. 116/2003, when addressing the calculation base for ISSQN in its
Article 7 established that this will be the price of the service.

The mentioned complementary norm also provides in the second paragraph of its article 7.
that in the calculation base of the services provided for in items 7.02 and 7.05 of the Services List
the value of materials provided by the service provider is not included.

Regarding the services provided by a self-employed professional, when they

find in the exercise of their professional activities, and regularly registered in
registration of the Municipality of Fortaleza, the Tax on Services of Any Nature
the incident will be due annually and paid in fixed installments.

There is still the legal provision that, when certain services provided in the
List of services provided by professional societies, these will be subject to
to the payment of the tax by fixed quota, calculated in relation to each professional
enabled, partner, employee or not, who provide services on behalf of the company,
although assuming personal responsibility, under the terms of the applicable law.

Rates

Currently, regarding the ISSQN rate, Amendment No. 37/2002 established that the
its minimum rate will be 2% (two percent) and LC No. 116/2003 established that the
its maximum rate will be 5% (five percent). Thus, the municipal legislation
can establish any rate for the ISSQN, as long as the maximum limit is observed
from 5% to a minimum of 2%.

ISSQN and the Simples Nacional

The option for the Simples Nacional does not exempt the service provider from undergoing the
retention of ISS according to the legislation of the municipality where they are established.
The rate to be used must be indicated by the service provider, observing the
rules of SIMPLES NACIONAL.

In the event that the Microenterprise (ME) or Small Business (EPP) is

subject to ISS taxation under the Simples Nacional at fixed monthly amounts, it will not be up to
withholding at source.

The service provider must inform, in the 'body' of the Service Invoice, the
tax rate of the ISSQN that will be withheld at the source.

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 If the microenterprise or small business detects that there was a difference
between the rate used and the one effectively assessed, it must be collected in the month
subsequent to the start of activity in the Municipality's own guide.

The service provider will also not be exempt from responsibility when
the ISS rate reported in the fiscal document is lower than the owed, in which case the
The collection of this difference will be carried out using the proper guide of the Municipality.

If the ME or EPP does not specify the ISSQN rate on the Service Invoice, the
the taker must withhold applying the highest rate of the Municipal Tax
provided for in the appendices of Complementary Law No. 123/2006.

When calculating the SIMPLES NACIONAL, inform how much of the revenue earned
was withheld at the source, so that the taxpayer does not pay the tax in duplicate
question.

4. TAX DOCUMENTS

Regardless of the types of tax documents, they all have something in common:
they are compulsory issuance documents for all companies. The control through the invoice
Fiscal is a way for the government to ensure that taxes and tax rates are
calculated and collected correctly.
With the technology and existing systems today in the market that can help with
control of tax documents.
The management of tax documents with technology has been enabling significant advancements.

through the use of electronic invoices, a project that several companies are already
adhering to achieve various benefits. Discover some of the advantages of its use:
• reduction of paper use;
• cost reduction in document storage;
• incentive for the use of technology;
• increase in confidence in invoices;
• improvement in tax control.
The Federal Constitution determines that the tax administrations of the Union,
States, the Federal District and Municipalities will act in an integrated manner, including with
the sharing of registrations and tax information, in accordance with the law or agreement.
In light of this constitutional provision, the Public System was established
Digital Accounting - SPED, the tax documents, we have:
• Electronic Transport Knowledge - (CT-e);
• Electronic Invoice (NF-e);
• Electronic Service Invoice (NFS-e);
• Electronic Tax Coupon and the Electronic Consumer Invoice (CF-e and
NFVC-e)

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5. TAX WRITING

The tax bookkeeping is the process of formally recording information and documents.
fiscal documents generated by a company. This data must be collected and organized for
posterior submission to the Public Treasury.

Every process involving tax accounting requires knowledge and compliance.

of tax and fiscal legislation, in order to ensure compliance with current regulations and
transparency in the information provided to the tax authorities.

In this way, every company, regardless of its tax classification, has the
obligation to report your transactions, data on revenue, taxes paid and
any other issues that may be relevant to the tax authorities. The transmission of these
data is done through tax bookkeeping directly to the Public System of
Digital Bookkeeping (SPED) that was instituted by Decree No. 6,022, of January 22
2007, defined as follows:
Instrument that unifies reception and validation activities,
storage and authentication of books and documents that
integrate the commercial and tax accounting of entrepreneurs and the
business companies, through a single, computerized flow of
information.

The SPED project has the main objectives:

• promote the integration of tax authorities through standardization and sharing
the accounting and tax information, respecting the legal access restrictions;
• Rationalize and standardize the ancillary obligations for taxpayers, with the
establishment of a single transmission of distinct accessory obligations from different
supervisory bodies; and
• make the identification of tax offenses quicker, with the improvement of
control of processes, the speed of access to information, and more effective oversight
operations with data cross-referencing and electronic auditing.
There are several benefits provided by SPED, among them:
• reduction in paper consumption, with cost savings and environmental preservation
environment
• cost reduction through the rationalization and simplification of obligations
accessories;
• standardization of the information provided by the taxpayer to the various entities
governmental;
• reduction of involuntary involvement in fraudulent practices;
• reduction of the time spent with the presence of tax auditors in the
taxpayer installations;
• simplification and acceleration of the procedures subject to control of
tax administration;

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 • strengthening of control and oversight through exchange of
information between tax administrations;
• speed of access to information;
• increase in auditor productivity through the elimination of steps to
collection of the files;

• the possibility of information exchange between the contributors themselves from

a standard layout;
• reduction of administrative costs;
• improvement of information quality;
• possibility of cross-referencing between accounting data and tax data;
• availability of authentic and valid copies of the accounting records for different uses
and concomitants;
• reduction of the 'Brazil Cost'; and
• improvement of the fight against tax evasion

6. FEDERAL OBLIGATIONS

The entities, after determining the taxes and accounting for this information, must
send this information to the relevant tax authorities. These authorities monitor the
taxpayers are determining whether taxes are being calculated correctly, if there are indications of fraud and

tax evasion and how the collection is in each city, state, economic activity.
This information is sent through ancillary obligations. The frequency
varies according to each declaration. There are monthly, semiannual, and annual declarations. There are

municipal, state, and federal statements. Failure to deliver within the deadlines.
stipulated may result in fines for delays and even an official fine, in case of
inspection.
It is important not only that taxpayers submit their declarations within the
deadline, but also that they are filled out correctly to avoid rework and even
even the inspection. Therefore, it is important that the accounting, the assessment
two taxes and the supplementary declarations provide the same information. The main
federal accessory declarations are:
• Digital Accounting Writing - ECD: annual ancillary declaration. Provides information on
balancetes, plano de contas, balancetes, Balanço Patrimonial, Demonstração
of the Exercise Result and accounting entries. It is the substitution of the Book
Diary and Reason.
• Tax Accounting Writing – ECF: annual accessory declaration. Informs the
assessment of taxes for taxpayers taxed based on Actual Profit,
Presumed and Arbitrated. It also informs the amounts that were withheld by
service providers, payments and receipts made abroad,
among other information. Taxpayers opting for the Simples Nacional
they transmit the DEFIS through the website of the Federal Revenue.

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 • Withholding Income Tax Declaration - DIRF: declaration
annual accessory. Informs which taxes were withheld by the paying source
Throughout the year. Entities in the Actual Profit system must submit the DIRF,

Presumptive, Arbitrated, and Simple National.

• EFD-Contributions: monthly accessory declaration. Reports the assessments of
PIS and COFINS, input credits, withholding at the source, in addition to the

entry and exit documents.

• Federal Tax Debts and Credits Declaration - DCTF: declaration
monthly accessory. It informs the federal tax debts and the way it was
removed. The taxpayers of the Actual Profit, Presumed Profit, and
Arbitrated.
• EFD-Reinf: monthly accessory declaration. Informs about the source withholdings of the
federal taxes will eventually replace the DIRF.
• EFD–ICMS/IPI: monthly accessory declaration. Reports the assessments of
ICMS and IPI.
There are other ancillary statements that depend on the activity carried out.
by the taxpayer. The important thing is to know which declarations must be submitted and
how they are related.

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 REFERENCES

National Tax Code

State Decree 24,569/97 (Regulation of ICMS–Ceará)
Federal Decree 3.000/99 (RIR)
Federal Complementary Law 116/2003
Federal Complementary Law 123/2007 (National SIMPLES)
Federal Complementary Law 127/2007
Federal Complementary Law 128/2008
Municipal Complementary Law 14/2003 (Regulation of ISSQN of Fortaleza)
Municipal Law 4,144/1972 (Tax Code of Fortaleza)
Federal Law 9,718/98
Federal Law 10,637/2002
Federal Law 10.833/2003
SILVEIRA, Orlando. Simples Nacional. Fortaleza: Fortes, 2007.
OLIVEIRA, Gustavo Pedro de. Tax Accounting. São Paulo: Saraiva, 2005.
www.classecontabil.com.br
www.sefaz.ce.gov.br
www.sefin.fortaleza.ce.gov.br
www.receita.fazenda.gov.br
www.receita.fazenda.gov.br/simple national

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