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ONESOURCE Indirect Tax
CAMILO MARTINEZ – VAT BUSINESS CONSULTANT
ONESOURCE® Indirect Tax DeterminationWebinar – Brazil – March 21, 2013
Today’s SpeakerCAMILO MARTINEZ• VAT Business Consultant for Thomson Reuters, Boston
Indirect Tax group.
• 20 years experience in the field and a Juris Doctor by the prestigious Sao Paulo (Brazil) University, specializing in private international law.
• Worked in corporate matters and international direct and indirect taxation in Brazil, England, France, Hungary, and Venezuela.
• Lectured in Brazil for think-tank international trade candidates to the Brazilian IRS, and in Europe for the VAT Forum.
• Advised many companies on a wide range of issues. Familiar with the various indirect tax regimes worldwide, including European VAT, Canadian and Australian GST, Brazilian taxation, and Japanese consumption tax.
General outlook for BrazilOpportunities:• Collectively, US-headquartered companies are the
largest foreign investors in Brazil
• Economic development followed political stability
• Market of approx. 200 million people
Challenges:• Heavily regulated economy
• Foreign exchange controls
• Slow judiciary process
• Organized labor
Common characteristics with LATAM
• No tax harmonization with neighboring countries
• VAT Withholding, e-invoicing, e-bookkeeping and e-returns are methods to combat tax evasion
• VAT credits to be carried forward
• No VAT refund to non-resident foreign entities
• No non-resident registration
• Locked VAT credits
Brazil – General Considerations
• Indirect taxation at the 3 administrative levels: Federal, State and Municipal (local)
• Mixture of cumulative and non-cumulative taxes
• Tax-on-Tax across administrative levels
• Thousands of taxing jurisdictions
• VAT Withholding (ST – Substituição Tributária)
• No refund mechanism for non-resident entities
• Credit carried forward
Brazil – General Considerations – contd.
• Limited cash refunds• Opportunity to sell excess credits• Statute of limitation: 5 years• No non-resident registrations• No VAT groups• “SPED” initiative
One of the main challenges:Trapped credits due to export, inter-State
commerce or VAT Withholding
BRAZIL
Tax Description
IPI(Imposto sobreProdutosIndustrializados)
• Non‐cumulative tax on manufacturing and importation of goods
PIS (Programa de Integração Social)
• Gross‐receipt tax• Cumulative or non‐Cumulative
COFINS (Contribuição para o Financiamento da Seguridade Social)
• Gross‐receipt tax• Cumulative or non‐Cumulative
BR Federal Taxes in Determination1 Jurisdiction
BRAZILTax Description
ICMS(Imposto sobre a Circulação de Mercadorias e Serviços)
• Non‐cumulative tax on goods and selected services
• Telecommunications,Utilities, inter‐State and inter‐Municipal transportation
ICMS‐ST(Imposto sobre a Circulação de Mercadorias e Serviços –SubstituiçãoTributária)
• Non‐cumulative tax on goods• VAT withtholding perception• Arbitrary profit marginsproduct and/or industry driven
• Bilateral or multilateral State agreements
BR State Taxes in Determination26 + 1 Jurisdictions
BRAZILTax Description
ISS(Imposto sobreServiços)
• Cumulative tax on most services
• Thousands of tax jurisdictions
• Harmonization by Federal Law
BR Municipal Tax in Determination5,000+ Jurisdictions
BR-specific Tax Logic• In Brazil BRL100 + 10% = BRL111.11
• Federal-level IPI is part of State-level ICMS tax base for b2c transactions but not so for b2b transactions
• State-level ICMS has two sets of multiple rates, one for intra-State transaction and one for inter-State transactions
• Federal-level IPI, State-level ICMS and Municipal-level ISS are all part of the taxable base of Federal-level gross-receipts taxes PIS and Cofins
• Federal-level gross-receipts taxes PIS and Cofins may be recoverable or non-recoverable, depending on the way one declares corporate taxes.
Our Brazilian Expertise
Fortune 500® Chemical Company• 11 countries (Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica,
Guatemala, Paraguay, Peru, Puerto Rico and Venezuela)• 23 operating units• USD $6 billion/year revenue• Complete order-to-cash and procure-to-pay processes• VAT Withholding (ICMS ST) in Brazil• Go-Live in October 2012
U.S. Retailer of Autoparts• POS Brazil (AIRES), go-live in October 2012
FILENAME CONFIDENTIAL – NOT FOR REDISTRIBUTION 13
Brazil1000+ employees
Santiago, Chile182 employees
Cochabamba, Bolivia
51 employees
Note: Included TRTA-dedicated GGO employees
Brazil and LATAM Employee Base
Mexico City, Mexico
100 employees
Lima, Peru105 employees
Buenos Aires, Argentina263 employees
BRAZIL
LATAM
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