Originally published in the July 6 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
The tax portion of Brazil’s General Small Business Act (Complementary Law 123/2006) entered into force on July 1, putting into effect the Super Simples simplified tax regime for small businesses. Under the Super Simples regime, eligible companies will pay a single tax in place of:
- corporate income tax;
- IPI (federal excise tax), except on imports of foreign goods;
- the 9 percent CSL (Social Contribution on Net Income);
- COFINS (the Contribution for the Financing of Social Security);
- P.I.S. (the Program for Social Integration contribution);
- social security payroll tax, including social contributions to private social assistance agencies;
- state VAT (ICMS); and
- municipal service tax (ISS).
Migration from the former simplified tax regime (Simples) to Super Simples should be automatic as long as the eligible company has no pending federal, state, or municipal tax liabilities. According to the Super Simples Steering Committee, only 50 percent of the companies under the former Simples regime (approximately 1.3 million taxpayers) have been automatically transferred into Super Simples. The remaining 50 percent have not changed over because of an express prohibition or pending tax liabilities.
According to Super Simples rules, eligible taxpayers with pending tax liabilities have until July 31 to pay the debt or apply for a special tax payment schedule before reapplying for Super Simples. The special payment schedule applies only to federal taxes (namely, corporate income tax, IPI, CSL, P.I.S., COFINS, and social security). Payments of any pending ICMS and ISS tax debts follow state and municipal rules, respectively.
Failure to comply with the deadline will exclude the taxpayer from Super Simples for the remainder of 2007. In that event, the taxpayer will be required to pay taxes under either the presumed (lucro presumido) or actual (lucro real) income tax method, which would significantly increase the tax payments for the remainder of 2007. The taxpayer may reapply for Super Simples for calendar year 2008.
David Roberto R. Soares da Silva