How the new Brazilian tax reform impacts Foreign Trade

Potential Effects on Trade Simplification and Competitiveness
June 3, 2024
Written by Alex Martinowski

After decades of discussions, the Brazilian Government is implementing a significant tax reform that has already been approved by the Chamber of Deputies and is currently being analyzed by the Federal Senate.

Key Aspects of the Reform

This reform aims to impact both the domestic market and import/export operations by promoting greater tax simplification, transparency, and exemptions for essential items such as food and medicines, among others.

Impact on Import Procedures

One key aspect of the reform is that discussions about the classification of goods upon import will be limited to the import tax. This change is expected to streamline the application of tax rules and reduce legal disputes. With fewer conflicts, imports are likely to become more attractive.

Under the general rules, there will be no increase in the tax burden on imports. However, strategic sectors such as electricity, telecommunications, and industrialized products are expected to see a reduction in their tax burden, while the services sector might experience an increase.

Simplification and Competitiveness

Import procedures are set to become simpler due to the reduced number of taxes and fewer disputes over goods classification, making imports more appealing.

Regarding competition, the changes in the tax burden will mirror those in the domestic market, ensuring that the competitive balance remains unaffected. Simplified procedures should also benefit the internal to outweigh any adverse impacts.

Sectors Benefiting from Tax Reductions

Several sectors will benefit from a 60% tax reduction, including:

  • Education services
  • Health services
  • Medical and accessibility devices for people with disabilities
  • Medicines and basic menstrual health care products
  • Collective passenger transport services (urban, semi-urban, metropolitan, intercity, and interstate)
  • Fresh agricultural, fishing, forestry, and plant extractive products
  • Agricultural inputs, food for human consumption, and personal hygiene products
  • National artistic, cultural, journalistic, and audiovisual productions
  • Goods and services related to national security, information security, and cybersecurity

Awaiting Senate Approval

As we await the Senate's approval of the Tax Reform, the expectation is that it will simplify the tax system, stimulate the Brazilian economy, and enhance Brazil's competitiveness in international trade, both in imports and exports.

How CATTS Can Help

Given the significant changes introduced by the Brazilian tax reform, businesses involved in foreign trade will need to navigate new regulations and optimize their operations accordingly. CATTS, a trade compliance and customs consulting and managed services provider, can offer invaluable support during this transition:

  1. Regulatory Compliance: CATTS can help businesses understand and comply with the new tax regulations, ensuring that all import and export operations are conducted within the legal framework.
  2. Customs Consulting: With expertise in customs procedures, CATTS can assist in simplifying import processes, reducing the complexity of goods classification, and minimizing legal disputes.
  3. Managed Services: CATTS provides managed services to handle routine compliance tasks, allowing businesses to focus on their core activities. This includes managing documentation, ensuring timely filings, and maintaining up-to-date records.
  4. Training and Support: CATTS offers training programs to keep businesses informed about the latest regulatory changes and best practices in trade compliance.

By partnering with CATTS, businesses can ensure a smooth transition to the new tax regime, maintain compliance, and enhance their competitiveness in the international market.The Brazilian tax reform represents a significant shift in the country's tax landscape, aiming to simplify taxes, stimulate the economy, and boost international trade. With the expertise and support of CATTS, businesses can navigate these changes effectively and capitalize on the opportunities they present.

How we can help

CATTS Consultancy

With our expertise in customs and trade regulations, we offer tailored consulting services to ensure that businesses are fully prepared for regulatory changes, such as Brazil's new tax reform. Services include guidance on complying with new import/export procedures, assistance with the classification of goods, and strategies to leverage tax reductions in various sectors.

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