The Tax on the Circulation of Goods and Services (ICMS) is a state tax that is present at all stages of the commercialization chain of products and services. Created by the 1988 Constitution, the ICMS is essential for the collection of Brazilian states, accounting for a significant portion of tax revenue. Its application ranges from the movement of goods to transportation and communication services, and it is regulated by Complementary Law No. 87/1996, known as the Kandir Law.
How the ICMS works
ICMS is applied both to operations within the same state and to interstate and international transactions. Each state has the autonomy to set its own rates, which can create tax complexities for companies operating in multiple states. In addition to internal rates, there are specific rates for transactions between states, which vary from 7% to 22%according to recent legislative updates.
ICMS calculation rules
Calculating ICMS involves several steps, including determining the calculation base and applying the corresponding rate. The calculation basis is usually the value of the transaction, including freight and insurance, if these items are part of the price charged to the recipient. From there, the internal or interstate rate is applied, depending on the nature of the operation.
Read more about: How to calculate ICMS on the Simples Nacional surplus?
Impact on interstate operations
In interstate operations, ICMS is one of the crucial points to consider, as the rate applied varies according to the origin and destination of the goods. For example, when goods leave one state for another, ICMS is due to the destination state, and it is important to calculate this tax correctly to avoid tax problems and ensure legal compliance.
ICMS calculation rules
Calculating ICMS involves several steps, including determining the calculation base and applying the corresponding rate. The calculation basis is usually the value of the transaction, including freight and insurance, if these items are part of the price charged to the recipient. From there, the internal or interstate rate is applied, depending on the nature of the operation.
Examples of ICMS calculation by segment:
To illustrate how ICMS is calculated in different segments, let's look at some examples:
- Industry: A food industry located in São Paulo sells a batch of products to a distributor in Rio de Janeiro. The ICMS will be calculated based on the interstate rate of 12%, according to the legislation in force between the states of São Paulo and Rio de Janeiro.
- Information Technology (IT): A software development company in Minas Gerais makes a sale to a company in Paraná. In this case, ICMS will be calculated based on the interstate rate of 12%, since both states fall into this category.
- Telecommunications: A telecommunications operator in São Paulo provides services to customers in Amazonas. ICMS will be calculated based on the interstate rate of 12%, considering the nature of the communication services.
Highlighting ICMS on Invoices
The electronic invoice (NF-e) is the official document for recording all transactions subject to ICMS. In it, the value of the tax is highlighted separately, demonstrating transparency and compliance with current legislation. Filling in the NF-e correctly is essential to avoid problems with the tax authorities and ensure that all tax obligations are being fulfilled properly.
ICMS taxpayers
All entrepreneurs and companies that carry out transactions involving the movement of goods, the provision of interstate and intercity transportation services and communication services are considered ICMS taxpayers. Individuals or companies that import goods from abroad are also tax payers, even if they don't regularly do so.
Accessory obligations and fiscal control
In addition to paying the ICMS tax, taxpayers must also comply with various ancillary obligations, such as submitting the monthly Digital Tax Bookkeeping (EFD)These obligations include the submission of tax forms and other declarations specific to each state. These obligations are essential for fiscal control and transparency of business operations, ensuring that all the necessary information is available for auditing and inspection purposes.
Non-cumulativeness and offsetting of credits
One of the most important characteristics of ICMS is its non-cumulative nature, which allows taxpayers to offset the tax paid in previous stages against the tax due on subsequent transactions. This avoids the incidence of tax on tax and contributes to reducing the effective tax burden on companies.
Complexities and challenges of the ICMS
The diversity of tax rates and rules specific to each state can make ICMS management complex for companies operating nationwide. It is essential that entrepreneurs and managers are always up to date with changes in tax legislation and best practices for correctly complying with tax obligations.
Table: New ICMS Rates 2024
| UF | Previous rate | New rate | Effective from | Observations / Legislation |
|---|---|---|---|---|
| Acre | 19% | - | - | |
| Alagoas | 19% | - | - | |
| Amapá | 18% | - | - | |
| Amazonas | 20% | - | - | |
| Bahia | 19% | 20.5% | 07/02/2024 | Law 14.629/2023 |
| Ceará | 18% | 20% | 01/01/2024 | Law No. 18.305/2023 |
| Federal District | 18% | 20% | 21/01/2024 | Law no. 7.326/2023 |
| Holy Spirit | 17% | - | - | Increase announced, not implemented |
| Goiás | 17% | 19% | 01/04/2024 | Law no. 22.460/2023 |
| Maranhão | 20% | 22% | 19/02/2024 | Law no. 12.120/2023 |
| Mato Grosso | 17% | - | - | |
| Mato Grosso do Sul | 17% | - | - | |
| Minas Gerais | 18% | - | Increase announced, not implemented | |
| Pará | 19% | - | - | |
| Paraíba | 18% | 20% | 01/01/2024 | Law No. 12.788/2023 |
| Paraná | 19% | 19.5% | 13/03/2024 | Law no. 21.850/2023 |
| Pernambuco | 18% | 20.5% | 01/01/2024 | Law No. 18.305/2023 |
| Piauí | 21% | - | - | |
| Rio de Janeiro | 18% | 20% | 20/03/2024 | Law no. 10.253/2023 |
| Rio Grande do Norte | 20% | 18% | 01/01/2024 | Law No. 11.314/2022 |
| Rio Grande do Sul | 17% | - | Increase announced, not implemented | |
| Rondônia | 17.5% | 19.5% | 12/01/2024 | Law no. 5.634/2023 |
| Roraima | 20% | - | - | |
| Santa Catarina | 17% | - | - | |
| Sergipe | 19% | - | - | |
| São Paulo | 18% | - | Increase announced, not implemented | |
| Tocantins | 18% | 20% | 01/01/2024 | Law No. 4.141/2023 |
CLM Controller and strategic support in ICMS
For companies looking for efficient management of ICMS and other tax obligations, the CLM Controller offers expertise and specialized support. With over 40 years of experience, CLM Controller stands out for its ability to offer customized solutions in accounting, taxation and compliance. Its services range from tax consultancy to complete management of ancillary obligations, guaranteeing compliance and efficiency in tax management.
The CLM Controller is prepared to help companies of all sizes and segments, offering strategic insights and personalized support to meet the challenges posed by the ICMS. With a clear focus on simplifying tax complexity, the CLM Controller has become an essential partner for companies looking to optimize their tax processes and reduce operational risks.
Conclusion
ICMS is an essential tax for the Brazilian economy, guaranteeing resources for the states and the Federal District to invest in infrastructure, health, education and other essential public services. For companies, understanding how ICMS works and its implications for operations is essential for efficient tax management and avoiding problems with the tax authorities. Relying on the specialized support of CLM Controller can make all the difference in tax compliance and reducing tax costs, allowing companies to focus on their growth and development in the domestic and international markets.
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