Importing tablets and musical instruments into Brazil

FROM A CONVERSATION WITH A CLIENT (details have been changed)


Hello

My name is Sam Wilson and I am seeking any information on the process and procedures of shipping to Brazil. 

The products that I would be shipping includes: laptops, phones, tablets, and musical instruments.

I have a contact in Goiania that would re-sell the products.

What sort of licensing would be needed to ship these products into brazil?

Thank you.


S.T.Wilson

-----------------------------

Thanks for the contact. 

First of all, you must make sure that you distributor in Goiania is company licensed to import. It must possess the import license, which is commonly referred to in Brazil as RADAR (read about here).

Importing electronics into Brazil is not specially complicated. However, since you are dealing with equipments that will make us of WIFI, 3G, Bluetooth and other forms of electromagnetic communication you will need to have them certified by Anatel, the Brazilian telecommunication agency. (there is a lecture about it in the blog, but it has not been translated to English yet)

Products from famous brands such as Vaio, Dell, Nokia and Apple are probably alredy authorized by Anatel. But they are probably subject to exclusive distribution agreements too. So, don't risk selling them here before obtaining proper authorization by the owners. 

Most musical instruments are not regulated, except from toy one or some lines that are directed towards children. 

Please let me know if I can help. 

Regards 

Adler

Common doubts about creating a Brazilian import company

This blog has a lot of articles about Brazilian import procedures and Brazilian import costs. 

But this might be just the one that was missing. 

I had an email conversation with a potential client, in which we covered all of the most frequent questions asked by those who plan to incorporate a company in Brazil and start importing and reselling (which is, I must say, a splendid notion, given Brazil's lack of industry and inclination towards imported goods, specially shiny thing with a brand on it)



Please take note:





Blog reader: How long will it take with your experience to incorporate this import export company?

2-3 months to incorporate, plus one month to obtain the import license. 
(See also: Incorporating a Brazilian company, step by step)

Blog reader: How long it will take to get this import license as well.

One month, as above. 

Blog reader: How many people we must have in the company.  I would like to include as well my girlfriend to facilitate her  residence permit as a passive member of the company.  Are we going to need as well a Brazilian or not?

If each of you invest 150.000 BRL (UPDATE FROM 2016: NEW MINIMUN IS 500,000 BRL, EXCEPT FOR TECH COMPANIES, WHICH MAY INVEST 150,000 BRL)  you two can be Directors. If she does not invest in the company, and is hired as an employee, then there must be two Brazilian employees to each foreign employee. 

 Blog reader: The amount of $150,000 every 6 months is very little so I would like a higher license.  What do you mean with investing R$300,000 in equity get a higher import license?  Do you mean the capital of the company by equity? The money that we put in the companies bank account so we show that the capital is there? Please comment on this.

Yes. The total availability of capital of the company is taken into account when evaluating the expansion of the import license. So, any equity, loans, etc will help  

 Blog reader: Can I have please the scale of import licenses of Brazil so I can see what is available and what is suitable for my project.

There is no standard scale. The evaluation is made on a case by case basis. 

 Blog reader: As for the visa now I want to invest more I think there is an option of R$600,000 for my investor visa to be on the safe side can I with this money ask as well for my girlfriend the same visa.  She is not my wife!!. 

Each director visa must be "bought" with a  separate deposit of R$600.000,00. 

Blog reader: Where this money is going to be held?  Can you please give me more details.

The money must be deposited in the company's bank account. The government will not control how you use it.

 Blog reader: Can this incorporation licenses and residencies be finished by end of April 2014 if we are ok with all paper works before Christmas around the 23rd of December?

If we start now (December), April is a reasonable deadline. 

-------

See also: 

Incorporating a Brazilian company, step by step

Importing to Brazil: Import by Order and Import on Behalf of Third Party

Many of our clients that seek advice regarding international contracts in Brazil are usually completely lost about import procedures in Brazil. 

I have been noticing that the lack of understanding about Brazilian import modalities can drive foreigners towards bad or inneficient deals. 


Thus,  we bring  a little explanation about import modalities. We will focus on indirect imports. That is, import procedures in which the importing company does not perform all import procedures, but outsources them to specialized companies. 

Please not that, for the procedures below to work, a Brazilian importer must hire a Trading Company. So, either the investor must have a subsidiary/controlled company in Brazil, or the final client must hire a Trading Company in order to import the goods from the foreign seller.  

There are two forms of indirect importation: import by order and import on the behalf of third party. 

The major problem surrounding the choice of them is the lack of accurate information regarding the tax burden and the peculiarities of each procedure, which we will try to clarify below.

Import by order

In this modality, a Trading Company will buy and import the goods with its own financial resources and commits to resell them to the buyer (the real importer), due to a contract previously concluded.

The taxes incident on the import operation, which will be fully funded by the Trading are Importation tax (II), ICMS, PIS / COFINS, IPI and IOF, just like the ones in a direct import.

For such services, the Trading can embed its fees in the sales invoice or opt for the commission system, always defining such option previously on the contract.

The catch is: the Trading Company must resell the goods to the final importer. When this sale is made, VAT taxes will apply, just like in any internal sale in Brazil. The operation becomes more expensive, as a result.

It is important to highlight that even if the buyer delegates all customs clearance work to the Trading Company, the buyer is still required to obtain Brazilian Import Licenses (SISCOMEXand RADAR).

Import on behalf of third parties

In this mode of importation, the buyer is the real owner and importer of the goods  and the Trading is a mere intermediary that assists in the bureaucratic process. There must be a formal agreement between Trading Company and Importer.  

The buyer shall pay the  supplier and the import taxes directly.

Import taxes apply as usual. 

After import taxes are paid and customs are cleared, the Trading company must issue a "nota fiscal de transferência" (a transportation document, required by the Brazilian Revenue Service) and ship the goods to the final importer.

It is precisely no this that the Import on behalf of third party differs from Import by order. Since it is a mere remittance, this operation does not constitute a taxable event for PIS/COFINS (one of the Brazilian VAT).  Thus, the taxation levied on the transference of the  goods from the Trading to the importer is lower in this modality than in the import by order.

Moreover, in this kind of import, the Trading’s services are paid by the buyer through  a service invoice (in the previous modality, the Trading would add an "overhead" to the merchandise cost).

With respect to registration formalities, the buyer is also obliged to obtain the RADAR/SISCOMEX.

COMPARISON

In conclusion, each of the methods has its pros and cons. If the buyer does not want to bear the risk of import and do not want to spend its capital since the beginning of the importation process, he should opt for import by order, since such burden falls on the Trading.

 In contrast, in a different analysis, it is more profitable to use the import on behalf of third party, since the VAT charged in the  transfer of the goods from the Trading Company to the final buyer is considerably lower.

See also:

Step by step for the Brazilian Import License (RADAR/SISCOMEX)

Exemption of import tax for machinery - Import permits for electronics and drugs 

Taxation of software importation by end users in Brazil 

Business Basics in Brazil

How to calculate Brazilian import costs

Step by step for the Brazilian Import License (RADAR/SISCOMEX)

See also:

- Business Basics in Brazil
- Brazilian Import Costs

Today I would like to demystify some of the (overly bureaucratic) Brazilian rules on import and export licenses. I hope it helps the readers of my blog.

Secretly, I'm hoping that this detailed explanation will discourage my reader to try obtaining import licenses by themselves. The golden rule in Brazil is: never do anything by yourself. Brazil is not for beginners. 

In Brazil, all foreign trade operations require a certificate from the Brazilian Revenue Service (BRS) called "RADAR" (acronym in Portuguese for "Customs Stakeholders Performance Tracking System"). It is also necessary to be registered at the Integrated Foreign Trade System (Siscomex), which is responsible for the storage and control of all the Brazilian and foreign importers and exporters information regarding the transactions carried out by them.

Thus, in order to assist those who have interest in importing or exporting goods, we prepared this little manual guidance to help you get the RADAR / SISCOMEX license.

Important: If you are a foreign company who wishes to export to Brazil, you don't need a RADAR. Your buyer will need one. 
                       On the other hand, if you want to set up a subsidiary in Brazil, in order to resell your own merchandise, then you will need an Import License. 

First step - obtaining digital certificate

Firstly, the taxpayer must obtain a digital certificate to access the website of the Brazilian Revenue Service, since all documents must be sent online through a software (called "PGS"), an application that allows the taxpayer to upload all the necessary documents.

You can obtain the digital certificate with any of the certification companies at  this link.

After that, you must access this link and click on “acessar o portal e-CAC” (access the portal e-CAC) and select the Mailbox Portal CAC as your Electronic Tax Domicile (DTE), clicking on "Termo de Opção pelo Domicílio Tributário Eletrônico" (Term Option for Household Electronic Tax).

When the Statement Option appears on the screen, click on "Enviar Opção" (Send Option).  After this, the taxpayer will still be given the option to register up to 3 phone numbers to receive messages that inform the delivery of Revenue communications regarding the procedure.

Second step-Survey of documents to be submitted

The following documents are required for enabling SISCOMEX / RADAR:

- Enabling Application: Available at this link. Among the general data to be reported, you should have the following information:

·         The capital effectively paid by the company (in case of companies);

·         If the application is filed by an attorney, the attorney’s complete data. 

Ps.: The attorney cannot be enabled as the one responsible in the computerized systems (Siscomex or other).

·         The complete data of the customs forwarder in the event of using one to make the customs clearance.

- Certified copy of identification document of the legal representative of the corporate and of the signatory of the application, if they are different people;

- Power of attorney, if applicable;

- Articles of Association / Last amendment of the Articles of Association;

- Simplified Certificate of Commercial Registry (issued for a maximum of 90 days);

- Headquarters’ proof of "enabled/active" registration in Sintegra or written justification signed by the company if such proof is not mandatory;

- Initial Registration Form and Managers and Legal Representatives update: Can be obtained through the link. In section V - Specification of Systems and Profiles, fill the field systems with "Siscomex" and in "Profiles" the word "Responsible". The document shall be signed and notarized;

- Declaration signed by the applicant that all documents presented confer with the original.

These documents should be scanned, front and back, and saved to a file extension. "Pdf". It is important to highlight that the process does not accept e-files larger than 14MB.

The procedure for registration of attorney and delivery of PoA basically follows the same rite, but the taxpayer must select at the portal e-CAC the option " procuração eletrônica ", followed by " cadastrar procuração" and upload the document.

It is noteworthy that in the event of a change in the qualification already obtained, you must also fill out the Request for Qualification, stating the nature of the change, following the same procedure mentioned above.

Third step - Download of the Delivery Request Generator Program (PGS) and submission of documents

As mentioned, since the administrative procedure for SISCOMEX / RADAR license is completely digital, the documents mentioned above must be sent through the Delivery Request Generator Program (PGS).

To download the PGS just click at this link, and select the proper computer configuration.

After this, the taxpayer must access the e-CAC portal and click on "Processo Digital" (Digital Process) and follow the next screen on "Solicitação de Juntada de Documentos" (Documents Upload Request). Done! Documents can now be sent and processed by the BRS.

As it turns out, the procedure seems complicated, but with this little manual I hope it will be easier for taxpayers to obtain their RADAR / SISCOMEX license. It is important to remember that if the taxpayer does not want to have such work, there are many accounting and law firms specialized in foreign trade that already have knowledge of such process and that could help you.

See also:

- Business Basics in Brazil
- Brazilian Import Costs

How much cheaper are Brazilian imports after the Supreme Court tax ruling

NOTE: You may also want to see How to calculate Brazilian Import Costs

I was about to write a post commenting the recent decision of Brazilian Supreme Court, which altered the calculation of one of the taxes over imports. 

But I have read the article below, written beautifully by Mr. Arnaldo Bleuez, with whom I have been working lately, and decided to post it here unabridged. 

Mr. Bleuez is  British Chartered Accountant and alumnus of PricewaterhouseCoopers, is currently a partner at Bleuez  & Partners consulting, dealing on Finance, Taxes, and Business Opportunities. His accountancy firm is based in Brazil.

You may reach him at arnaud@bleuezconsulting.com.   More detailed contact info at the end of the post. 

I should add that the decision is not valid for everyone (it is not erga omnes). Each importer must look for the courts in order to have the calculation of PIS/COFINS reevaluated for its own imports

The article below focus exclusively on the impact of the elimination of the State Tax (ICMS) from the calculation of PIS COFINS over imports. The total tax reduction would be slightly larger than the one indicated at the end, due to some other adjustments in the calculation that were also included in the ruling.

The impact of the STF decision on excluding ICMS

from the base of calcuation of PIS and COFINS for exports to Brazil

INTRODUCTION

On 20^th March 2013, the STF (Supremo Tribunal Federal) has decided that the inclusion of ICMS within the base of calculation of PIS and COFINS for exports to Brazil is unconstitutional. As a consequence, exporters to Brazil may expect a decrease of the tax burden.

That sounds good, but we still need to know how relevant is this decision for exporters to Brazil?

This demonstration intends to explain to our clients and prospects how this change will impact the overall tax burden.

NUMBERED DEMONSTRATION

Let’s start with a calculation of the overall tax burden for an exporter to Brazil. It’s complex.

Here is an illustration with an example of a pharmaceutical product:

Importation of a laboratory / pharmaceutical product (NCM code: 3926.90.40) into Brazil:

customs value:            100

currency:                     Euro

rate of ICMS:             17%

TEC (or II):                            18%

IPI:                             10%    

PIS:                            1.65%

Cofins:                        7.6%

II (Tax on Imports, ‘Imposto sobre Importaçao’)

IPI (Tax on industrialized products, ‘Imposto so bre Produtos Industrializados’)

PIS & COFINS: social contributions

Result of this simulation in Euros:

The basis for the calculation of the II is the customs value.

II: 18% * 100 = 18

The basis of calculation of the IPI is the customs value, plus the II.

IPI: 10% * (100 +18) = 11.8

PIS and COFINS are calculated based on: VD, ICMS, PIS and COFINS! To calculate PIS and COFINS, it is first necessary to calculate the ICMS.

ICMS is calculated on the basis of VD + II + IPI + ICMS + other (in this example, other = 0):

ICMS = 17% (100 + 18 + 11.8 + ICMS + 0)

ICMS = 17% (129.8 + ICMS)

ICMS = ICMS 21.96 + 0.17

ICMS 0.83 = 21.96

ICMS = 26.46

PIS:                 1.65% * (100 +26.46 + COFINS + PIS) = 2.30

COFINS:        7.6% * (100 +26.46 + COFINS + PIS) = 10.6

List of calculation above

II                     18%

IPI                  11.8%

ICMS              26.46%

PIS                  2.3%

COFINS         10.6%

TOTAL         69.16%

This calculation above does not take into account related expenses (freight, insurance, etc..).

As a consequence of the decision taken by the STF, ICMS (26.46 in our example) must be taken away from the basis of calculation of PIS and COFINS. Let’s see the impact :

PIS:                 1.65% * 26.46            = 0.44% to be taken away from PIS

COFINS:        7.6% * 26.46              = 2.01% to be taken away from COFINS

List of calculation above

II                     18%

IPI                  11.8%

ICMS              26.46%

PIS                  1.86% (2.3 – 0.44)

COFINS         8.59% (10.6-2.01)

TOTAL         66.71%

CONCLUSION

Following the SFT decision, one can expect a decrease of 2.45% on the tax burden (69.16 – 66.71).

This 2.45% result is correct for a 17% ICMS. It will different if your rate of ICMS is different.

This is good news for all companies exporting to Brazil and subject to ICMS.

The Federal Government still needs to comment on this decision and apply this it. There are also some doubts about the possibility of asking for a reimbursement of the excess of PIS and COFINS paid by exporters during the previous years.

------------------------------------------

Arnaud BLEUEZ

Chartered Accountant - Partner

11 9 5610 5550

arnaud@bleuezconsulting.com

Skype : arnaud.bleuez

IS IT SUPER EASY TO IMPORT FROM CHINA TO BRAZIL? WHY DOES IT HAPPEN SO MUCH?

Note: you might also want to read: Why do they invest in Brazil if importing seems so cheap right now?

Dear Adler,

How can a blooming trade between China and Brazil be explained, given all the import barriers, and troublesome bureaucracy in Brazil?

Are there special agreements, or perhaps deregulations apply as far as imports from China are concerned?

It has been impossible for me to find information that confirms so. Perhaps you could help me.

Thank you in advance.

Best regards

Konstantina

-------

Dear Konstantina, 

I'm flattered that you would ask me that. How did you find me? Through the blog?

The answer is, indeed, very simple: China is cheap. 

Actually, in my opinion Brazil should be importing a lot more from China, is spite of the import taxes and bureaucracy. I think the Brazilian entrepreneurs are still shy and not very prone to international trade, specially in states other than São Paulo and Rio. 

Few Brazilians participate in trade fairs in China (Canton fair, etc.). They usually wait until the foreign sellers comes to Brazil in order to present they products. 

In pure economic terms, it makes little sense to produce anything in Brazil at all. Everything should be imported. 

I'm hearing a lot of people talking about importing from Vietnam and Malaysia, too. 

I hope this helps. May I post this in my blog? It is a very interesting subject. 

Regards, 

Adler

------------

Dear Adler,

Thank you very much for your prompt response.

Yes, I got to know you through your blog and was impressed by the responsible, qualified answers you give.

I work for a company in Denmark and we are currently evaluating how attractive the Brazilian market is for our machines. 

Part of my market analysis involves trade barriers and your blog resulted in my search. I then read plenty about the fast growing trade economy between the two countries and curiosity stepped in.

Now I understand that China is cheap, import taxes are cumulative so even though taxes might reach 100% on top of invoiced price it will still be cheaper than importing from a not so cheap country to begin with. 

It explains it very clearly.

Thank you again Adler.

I'm flattered that you found my question interesting, you may certainly post it on your blog :)

Konstantina

------------------

Dear Konstantina, 

Thank you very much for the compliments. 

You are the third Danish client I have helped this year. Maybe I should visit Denmark. 

Regards, 

Adler

How to calculate Brazilian import costs

You must also read: Common doubts about creating a Brazilian Import Company

UPDATE FROM APRIL, 2013: There has been a slight decrease in Brazilian import costs. Please check: How much cheaper are Brazilian imports after the supreme court tax decision. Otherwise, the info below is still valid.

UPDATE FROM FEBRUARY, 2015: There has been a general increase in taxes. The info below does not reflect that. 

Every now and then people ask me how to calculate Brazilian import costs

Unfortunately, there is no easy answer for that.

Basically, the main costs are due to a series of additive taxes, namely:

Import Tax (II) - Which goes over the CIF price. To find the exact rate, one should check the HS code of the goods, according to the Mercosul tax classification, called NCM. The classification is basically the same, but there may be important differences. The full table may be downloaded at http://www.desenvolvimento.gov.br/portalmdic/arquivos/dwnl_1301080792.xls

Tax over industrialized products (IPI) - Which goes over CIF + II

The full Table of IPI rates may be found at http://www.receita.fazenda.gov.br/aliquotas/downloadarqtipi.htm

State Tax over the circulation of products (ICMS)

This is a kind of VAT, stablished by the estates. The  estate to which the goods are being imported will set the exact rate. The maximum rate, however, is 18%.  It is calculated over CIF + II + IPI + PIS/Cofins.

PIS and Cofins on import operations .

Those are federal contributions to the social security system. The usual rates are, respectively, 1,65% and 7,6%, although subject to many exceptions, both upward and downward. The calculation base is CIF + II + IPI + ICMS. The calculation of this tax is specially tricky and demands a mathematical formula.

IOF - This tax does not apply properly to import operations, but to all currency exchange agreements. Since most import operations will result in a currency exchange contract (e.g. Dollars to reais, or Euros to reais) , this tax will eventually be noticed by the importer. The usual rate is 0,38% of the contract value.

AFRMM.

Finally, apart from the taxes above, there is the contribution over the international freight, for the renovation of the merchant marine corps, or AFRMM.

As the name says, this contribution is calculated over the cost of the international freight, always at the rate of 25%. This contribution is unrelated to the other ones listed above.

To give readers a more solid idea of how to calculate these taxes I have made an automated spredsheet available at https://spreadsheets.google.com/ccc?key=0Ak-

xhn4MLJ9ldFR3TTNvRnVhNWNwQTZzOVoydjJ1YVE&hl=en#gid=1. 

 Please note that its purpose is to serve as a reference and not as a legal consultation. Also, keep in mind that I have not taken into consideration any of the tax exemptions or bureaucratic  pitfalls that may happen in a real life situation.

I hope you may contribute with your comments, so that I can go further in this theme.

UPDATE FROM APRIL, 2013: There has been a slight decrease in Brazilian import costs. Please check: How much cheaper are Brazilian imports after the supreme court tax decision. Otherwise, the info below is still valid. 

Please also check: Exemption of import tax for machinery - Import permits for electronics and drugs