Tax | Social Security Contribution on Gross Income: Key Aspects for Foreigners to Understand

One of the taxes levied on companies in Brazil is the Social Security Contribution on Gross Income (PIS/COFINS in Portuguese).

Such contribution has two forms of collection depending of the activities of the taxpayer: (i) non-cumulative regime which is a VAT-type, and (ii) a cumulative regime. 

Both are levied on gross income. The cumulative has a rate of 3,65%. The non-cumulative has a higher rate of 9,25%, bat allows the deduction of certain costs and expenses incurred by the company.

And that is where there are massive legal discussions by companies, lawyers and the tax authorities in order to define the specific typs of expenses that can be deducted. Some companies that do not pay extreme attention on these discussions, and the latest precedents of administrative and judicial courts, can end up collecting much more tax than it actually should do. 

The latest precedent of impact is one of the Administrative Higher Court, that stated that retailers, in some cases, can deduct their expenses with marketing and advertising. This is a kind of precedent that can actually change the bottom line.


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