Angelo Ambrizzi
Lawyer at Marcos Martins Advogados
The national tax burden is excessive. Brazil is the 14th country that collects the most taxes in the world and the one that gives the least benefits to its population. To pay these amounts, Brazilians have to work an average of 153 days a year just to pay taxes.
The figures are shocking, but how can they be reversed? There’s no shortage of opportunities, and that’s the main purpose of Tax Free Day, which takes place on May 27 in several states and aims to raise awareness about the tax burden in practice in Brazil. In 2020, the average tax burden reached 31.64%.
It’s easy to see that more than 30% of everything you consume, whether it’s a product or a service, is tax. However, there are products where the tax burden exceeds 60%, such as alcoholic beverages and cigarettes.
With lower taxes, the tendency is for the market to charge lower prices, promoting greater purchasing power, especially for the less favored social classes. In addition, part of this reduction could be turned into profit for the companies themselves, which could increase their investments, generating more jobs and a greater competitive advantage in international trade, which would create a cycle of bonanza for the country.
However distant all this may seem, it is worth noting that companies of all sizes and segments can request a review of their tax burden in order to pay less tax. Generally speaking, companies opting for the Presumed and Real Profits tend to have even greater opportunities for reductions. On average, more than 90% of companies that carry out tax planning manage to pay less tax.
The first step in analyzing a possible reduction is an individualized diagnosis of the company. The possibilities for reduction relate to taxes levied on payroll, turnover and profit.
Taxation can vary even between companies in the same industry, mainly because they buy goods in different states and import their products through different ports. All these variants need to be carefully mapped in order to identify opportunities.
Once all this information has been gathered, an opportunity map is drawn to reduce the tax burden and thus give the entrepreneur the option of going to the administrative sphere or the courts to question and request a review of their tax burden. The time taken to complete these processes varies from two to four years.
In recent years, the companies that have benefited most from tax planning/tax burden reduction have been services and retail.
For service companies, it is worth noting that the concept of service has undergone changes. This is because before, the term was considered only as an “obligation to do”. Nowadays, it is more related to the concept of “immaterial utility”.
It is undeniable that technology has largely transformed our society from the real world to the digital world – which is why the concept of services is undergoing significant changes. For this reason, technology companies need to be aware of the conceptual changes for legal purposes.
In retail, a great opportunity lies in carefully reviewing which expenses are being classified as inputs, since this classification can alter the possibilities for crediting Pis and Cofins. In these cases, it is possible, by analyzing the legislation and case law, to adjust the concept of input for tax credit purposes.
In short, however excessive the Brazilian tax burden may be, there are always good opportunities to relieve this pressure on companies.
Fortunately, there is a lot of information available today. However, it is essential to know how to organize this information so that entrepreneurs can understand their reality and make strategic decisions based on assertive, easy-to-understand advice.
Tax Free Day has the role of disseminating knowledge and raising awareness of the need to review all of our country’s tax legislation. In the meantime, it is necessary for individual companies to take action and seek a fair tax burden.
About Marcos Martins Advogados:
Founded in 1983, Marcos Martins Advogados is highly regarded in the areas of Corporate, Tax, Labor and Business Law. Based on values such as commitment, ethics, integrity, transparency, responsibility and the constant specialization and improvement of its professionals, the firm positions itself as a true partner for its clients.
