Do you know how taxation works for the importation of services?

In the current scenario, Brazil is experiencing a significant increase in the exportation of services, particularly in the technology and development sector. In 2021, the volume of exports in this segment grew by an impressive 72% compared to the previous year. This boom in demand for Brazilian services is a positive indicator, especially considering the economic situation we are going through.

However, when planning the importation of services from Brazil, there is a crucial aspect that foreign companies cannot overlook: the issue of taxes. The complexity of the Brazilian tax burden, even by international standards, requires companies interested in hiring services from Brazil to understand the federal, state, and municipal charges involved.

Here are the five main taxes that companies need to know before hiring services from Brazil:

This tax applies to the foreign exchange contract, typically with a rate of 0.38%. The IOF is calculated and collected by the financial institution responsible for the exchange operation, representing an additional cost for the Brazilian company providing services abroad.

Tax on Services of Any Nature (ISSQN)

The ISSQN is a municipal tax that arises from the provision of services, whether originating from abroad or initiated abroad and concluded in Brazil. The rates vary between 2% and 5%.

Social Integration Program and Contribution for Social Security Financing (PIS/COFINS)

Although often mentioned together, PIS and COFINS are two distinct taxes. They are charged when services are provided in Brazil to foreign companies or when services are provided outside of Brazil but with economic repercussions in the country. The rates for PIS and COFINS are, respectively, 1.65% and 7.60%.

Contribution and Intervention in the Economic Domain (CIDE)

This tax, aimed at stimulating technological development in Brazil, applies to the importation of technical services and administrative assistance, with a rate of 10%.

Withholding Income Tax (IRRF)

The IRRF is a federal tax applied to remittances of funds related to payment for imported services. The standard rate is 15%, but it can increase to 25% if the beneficiary is located in a jurisdiction considered a tax haven.

CLM Controller: Experts in Unraveling Taxes on Service Importation

While navigating through the five main taxes that companies need to master before hiring services from Brazil – from the Tax on Financial Operations (IOF) to the Withholding Income Tax (IRRF) – our specialized team provides precise guidance and tailored solutions for each client.

Want to learn more about how we can help your company unravel taxes on service importation? Visit our website today and discover how we can streamline this process for you. CLM Controller’s solutions now.