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Brazilian Tax Reform

Brazilian Tax Reform. October, 2019. Current Brazilian Tax System. Brazilian Tax Reform. Challenges. Conflict of competence (states x municipalities) D isputes of interpretation Bureaucracy Litigation in Brazilian courts. PEC 45/2019. PEC 110/2019. PEC 128/2019.

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Brazilian Tax Reform

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  1. Brazilian Tax Reform October, 2019

  2. Current Brazilian Tax System • Brazilian Tax Reform Challenges • Conflict of competence (states x municipalities) • Disputesof interpretation • Bureaucracy • Litigation in Brazilian courts

  3. PEC 45/2019 • PEC 110/2019 • PEC 128/2019 Proposals - Overview • CIDE-Fuel • COFINS • COFINS • IPI • IPI • PIS • IOF • CSLL • ISS • COFINS • ICMS • PIS • ISS • IOF • ICMS • ICMS • ISS • IBS • IPI • Federal IBS • Corporate Income Tax • Federal Selective Tax • IVA Federal • IMF • IPI • State IBS • PIS • IVA State/ Municipal • Ed. Salary • 6 extinctions • 5 extinctions • 9 extinctions • and 2 changes • Non-cumulative VAT • Federal Selective Tax for specific products considered negative externalities (e.g cigars and alcohol) • Non-cumulative StateVAT • Federal VAT for specific sectors • (e.g., fuel, oil, telecommunication) • Corporate Income Tax (CIT+CSLL) • Two changes: • ITCMD to be charged by Federal Government • IPVAencompassing aircraft and vessels • Non-cumulative VAT Federal • Non-cumulative VATState/Municipal • IMF: Tax over cash flow • IPI: only for specific products considered negative externalities • Taxation on profits and dividends • Digital and financial services/goods taxed exclusively by the Federal Government Brazilian Tax Reform

  4. General Opportunities and Challenges • Opportunities • Challenges • Broader tax basis: all types of goods, services intangible and other activities will be taxed, imposing taxes in activities which are not currently taxed (such as rental) • Potential taxation onevery transaction • Potential litigation on definition of destination • Potential accumulation or distortion of IVA credits depending on the companies’ activity • Lack of special regime to given sectors • Tax simplification • Uniform tax regime • Centralized collection • Non-cumulative tax (IBS or IVA): all credits • Simpler tax reporting • Relief of tax litigation Brazilian Tax Reform

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