Importing Goods into Brazil
It is common for Brazilian entities to import goods into the country. However, you cannot do so unless you comply with specific procedures. Import operations in Brazil are regulated by Brazilian Federal Revenue (RFB) and the Foreign Trade Secretariat (SECEX). It can be challenging for foreign companies to understand what is required, particulary when the companies is just starting out.
In our last post, we covered the process to incorporate a company in Brazil. Today, we are going to discuss the requirements for importing equipment or goods into Brazil using the new entity.
Step 1 – OBTAINING THE RADAR LICENSE
- The first condition to import goods into Brazil is to obtain a registration in RADAR from the Brazilian tax office. This registration requires the submission of specific documents and forms to the customs authorities. The approval of the RADAR can be automatic but there are times when the application can take up to a few weeks. We generally suggest factoring possible delays into this stage.
- There are two types of RADAR licenses: Limited and Unlimited. The Limited type is available to companies able to prove that they have capital of up to US$150,000 and allows them to import items with an estimated total price of US$150,000 for every 6-month period. The Unlimited RADAR is available for companies with capital over US$150,000. This license will have no limit on how much you can import.
- We generally suggest that first, the importer should apply for the Limited RADAR, and then, if needed, requests a Revision Procedure to migrate to the Unlimited RADAR can be done at a later time
- When you are incorporating the company, you will need to set the capital of the company in the bylaws. At this stage, a company will need to start thinking about how much they will import and which RADAR license they will need.
- Companies can start with the limited RADAR and then move up as needed. In other situations where the values of importations will be more, companies will need to start with the unlimited RADAR.
- It is important to remember that companies will need to pay in the capital amount and register these funds with the Central Bank before they can start the application process. Given the amounts, companies will need to budget for this as part of their startup costs.
- Companies need to be aware how the timeframes to obtain the RADAR can impact their commercial operations. It important to remember that the application process for the RADAR can only be started once the bank account has been opened and the company capital has been transferred and is registered.
- Once we start the application process, it can take anywhere from 1 week to 3 weeks to have an approval. Again, since this is a government office, there can be delays at this stage to receive the final approval.
Step 2 – ENROLLING IN SECEX
- Additionally, the importing entity should be enrolled in the Exporter and Importer Register (Registro de Importadores e Exportadores – REI) with SECEX, which is automatically completed during the first import transaction.
- Once registered with SECEX, the importer must obtain an importing license (LI) concerning the goods to be imported. Generally, the importing license is automatically granted on the filling out of an importing declaration (DI).
- The Brazilian importation specialist used by the company will assist with this process during the first importation.
- Companies generally do not see delays as it is essentially automatic.
STEP 3 – REGISTERING IMPORTATION WITH SISCOMEX
- Every item entering Brazil is subject to customs clearance, a fiscal procedure through which the accuracy of the declared importation documents is reviewed.
- The first step is to register the product within the SISCOMEX (Brazilian Foreign Trade Electronic System) and the RFB. All federal taxes must be paid electronically through this system. In this registration, all the information of the invoice must be informed, as well as the airway or port bill data.
- Several taxes are due when importing goods into Brazil: Import Tax (II), IPI, ICMS, PIS-Import and COFINS-Import, to mention the most relevant ones. The II and IPI rates vary according to the NCM tariff code for the imported product. The ICMS rate may also vary, but in average the tax rates are between 17% and 18%.
- Once the above requirements are met, the documents must be submitted to the customs authorities for clearance, which can be done under different channels. Depending on the channel of clearance, the products are submitted to an automatic (green channel) or non-automatic customs clearance (yellow, red, and grey).
- The issuance by Brazilian Federal Revenue of customs clearance is the final authorization for delivering the goods to the importer. After that, the products are cleared for various purposes, depending on the importer’s intentions. Considering this, the Brazilian Government has created some special customs regimes to facilitate the importation.
- The Brazilian importation specialist used by the company will assist with this process so most companies will not need to know the inner workings of registering with SISCOMEX.
- Since foreign companies will have every limited knowledge, it is critical that companies have an importation specialist who has the experience needed to assist with the importation, registration, and payment of taxes.
Step 4 – Admissions and Taxation
Temporary Admission – Temporary admission is a special customs regime that allows the importation of certain assets for a determined period, with total or partial suspension of taxes levied on imports, usually II, IPI, PIS-Import and COFINS-Import. Suspension of ICMS depends on specific State regulation.
Temporary Admission with Full Suspension of Taxes
- This type of temporary admission usually applies to items brought into the country for purposes other than economic use. That is the case, for instance, of items imported for use or display in cultural, artistic, scientific, trade or sport events, for cargo transport (ex., containers), or for testing. It also applies to items temporarily brought into the country under certain international agreements, such as technical and cooperation agreements signed between Brazil and other countries.
- The act granting the temporary admission establishes the term the imported item may stay in Brazil, and it usually considers the term estimated by the importer in the importing contract.
- Through this regime, the importer is not obliged to levy the taxes due in the import of goods into Brazil. However, if throughout the term established by the RFB, the importer fails to meet the requirements or keeps the item for longer than estimated, the taxes will be due.
- To obtain the special regime, it is mandatory for the importer to fulfill the requirements set by the Federal Revenue Department.
Temporary Admission for Economic Use
- This type of temporary admission applies to imports in which the item will be used for the rendering of services to third parties or in the production of goods for sale within the Brazilian territory. In these circumstances, temporary admission proportionally suspends all taxes levied on imports according to the number of months the item will be in Brazil for.
- In practical terms, imports under this type of temporary admission requires payment of the equivalent of 1% per month, limited to 100 months, of all import taxes (II, IPI, PIS and COFINS) that would be due in case of a direct import not subject to temporary admission.
- If the item is stays permanently in Brazil or is destined for local consumption, the importer is required to pay the balance between the totality of taxes due on the import and the proportional amount of taxes paid at the time of customs clearance.
Temporary Admission for Active Improvement
- This type of admission applies to temporary imports when the relevant foreign item will be subjected to improvement by the importer and then returned to the country of origin. In these cases, federal import taxes are fully suspended, except for the ICMS since it depends on State legislation.
- The RFB considers active improvement: the processing, assembling, renovation, reconditioning, packaging, or repacking, fixing, repairing or restoring of foreign items, by local entities, that must be returned to the country of origin.
- This type of temporary admission applies to imports when the Brazilian party acts as a service provider to the foreign owner of the item.
- To be eligible to this regime, the item must be owned by a foreign party, the Brazilian importer cannot pay for the item and the legal entity must headquartered in Brazil, and the activity to be performed in Brazil should be described as a service in the agreement.
- Under the Drawback regime, some taxpayers can import raw material, parts, components, packaging material and other items from abroad, free of import duties, provided that after a local manufacturing process, they export the final product. A minimum exchange gain, that is the export price over the import costs, is required for taxpayers to enjoy relief under the drawback regime.
- Companies importing under a drawback regime may enjoy the suspension or exemption of federal taxes levied on imports. Under some forms of drawback regimes, the taxpayer is also eligible for the suspension of ICMS, according to legislation of the State where the importer is located.
- To benefit from this regime, the taxpayer must file an application with the Ministry of Development, Industry and Commerce.
- Suspension Drawback: through this regime, the taxpayer is entitled to import materials with suspension of federal import taxes. After the local manufacturing using the imported materials, and exporting the final product, the tax suspensions become tax exemptions.
- Exemption Drawback: this regime requires a prior taxed import or local acquisition of materials by the taxpayer. After proving that it has used taxed materials to produce an exported product, the taxpayer may be authorized to import the same material, at the same quantity, free of federal import taxes. The exemption drawback works as a reposition of inventory.
Capital Assets Import
- When there is no national version of a specific product in Brazil, the Government understands that it is not necessary to protect the local industry from foreign competitors and there is no reason to submit this kind of operation to heavy taxation.
- Considering that, the Brazilian legislation foresees a special benefit called “Ex tarifário”, which consists of a reduction of the import taxes that would be levied upon the import operation and reaching a rate of 0%.
- The “Ex tarifário” procedure is specific to the importation of machinery and equipment, capital goods (BK), and goods for data processing and telecommunications (BIT).
- The “Ex tarifário” procedure takes approximately four months. It starts with a request to the Ministry of Development, Industry and Foreign Trade (MDIC) and, after analysis, a resolution from Câmara de Comércio Exterior (CAMEX) should be issued.
Brazil has unique importation requirements that are used to protect local industry and encourage domestic manufacturing. From licenses to taxes, importations can be difficult to navigate for foreign companies.
For this reason, it is critical to have an expert that can assist with the importations and taxes. Ax Legal and Freitas Ferraz will assist clients from start to finish. Our dedicated team will help companies obtain the RADAR license and provide guidance throughout the process.
Once the RADAR has been obtained, our team of experts will guide clients on which admission regimes are best suited for that import and the duties and taxes to be paid. This is particularly important for mining and industrial technology clients who are often importing equipment or products that may qualify for special admissions due to their uniqueness.
Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects our clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.
To better understand how we can support you in the Region, please contact Cody Mcfarlane at firstname.lastname@example.org