Originally published in the August 21 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Complementary Law 127/2007, which introduces changes to Brazil’s Super Simples tax regime for small businesses, was published in the country’s official gazette on August 15.
The changes facilitate access by small service companies and others to the Super Simples regime, created by Complementary Law 123/2006 (the General Small Business Act), and they are expected to benefit nearly 1.5 million taxpayers. Some sectors, such as cargo transportation, will benefit from lower Super Simples tax rates as of 2008.
The new law also allows taxpayers to include pending tax debts that were due by May 31, 2007, in a 120-month special tax payment schedule. The original version of the Super Simples law allowed taxpayers to include only tax debts that were due by December 31, 2006.
However, Complementary Law 127 brings no relief to commercial and industrial Super Simples taxpayers, whose sales to large companies do not entitle the buyer to take tax credits for ICMS (state VAT), P.I.S. (the Program for Social Integration contribution), or COFINS (the Contribution for the Financing of Social Security). Some large companies have been demanding price reductions to compensate for the lack of tax credits.
Those taxpayers have not yet lost hope that a change will be implemented to allow for the tax credits. Earlier this month, Finance Minister Guido Mantega announced that the government might soon issue a regulation that would allow P.I.S. and COFINS credits. The possibility of a tax credit for ICMS depends on negotiations with the state governments.
As of August 14, more than 3 million small companies had applied for the Super Simples regime.
David Roberto R. Soares da Silva