If foreign entity is to export services to Brazil, the following 4 aspects should be considered from a tax standpoint:
1. Legal concept of “service” is broad and includes many activities in Brazil, such as I.T., consultancy, technical assistance and publicity;
2. The tax on services is a Municipal tax. So, it is relevant to check the taxation applied by at the location of the client’s headquarter and where the service will be rendered. Rates can vary from 2% to 5% depending on the service and on the county;
3. There are multiple taxes, besides the specific tax on services (ISS) to consider when calculating the total tax burden, which include WTH tax (IRRF), Social Contribution on importation of services (PIS/COFINS), Contribution of intervention on economic domain (CIDE) and Tax on financing operations (IOF). The specific situation will determine which tax will be applied;
4. The tax rates can vary. For example, the withholding income tax (IRRF) is usually charged at 15% rate, but there are different rates to particular cases. For instance, it increases to 25% if the supplier is located at a jurisdiction that provides a preferential tax regim (tax haven).
A preliminary analysis for tax burden should not neglect based on the aspects above. It is crucial to bear in mind the particular aspects of each case in order to plan and price the service properly, especially if they are on a recurring basis.
