PIS and PASEP
The PIS and PASEP are social contributions payable by companies to finance the funds for insurance for unemployment , child benefit and allowance for low paid workers. PIS is short for “Programa de Integração Social” and PASEP stands for ” Programa de Formação do Patrimônio do Servidor Público“. Both programs are better known by the acronym PIS/PASEP. The current PIS/PASEP rate is 1.65%. Currently the allowance of PASEP (civil servants) is payable at the Bank of Brazil, while the allowance of PIS (employees of private companies) is done in the Caixa Economica Federal.
Social Contributions on Revenues
The financial contributions to the PIS and PASEP programs are levied based on the revenues received by the Brazilian legal entities under private law in general, including those similar to them by the law of income tax. Micro-enterprises and small businesses who have opted-in for the Simples Nacional regime will allow you to pay these contributions with a single tax payment called PGDAS.
Credits to your PIS/PASEP
Laws nos. 10637/02 and 10833/03 introduced the new system for verification of PIS and PASEP , which applies to the majority of the companies. The legislation has the intent to prevent the accumulation of this contribution by way of grant of credits in the acquisition of goods and services needed in the company’s activities.
Nowadays PIS and PASEP levy on a rate of 1,65% Under the new form of calculation of PIS and PASEP, the taxpayer is entitled to the credit related to the contribution pursuing from the operations of:
1. goods acquired for purposes of resale, excepting for those goods expressly referred to;
2. goods and services used as input for the rendering of services and for the production or
manufacturing of goods or products addressed to sale, including fuels and lubricants;
3. electrical and heat powers, including steam Power, consumed in the legal entity’s
4. payment of leases of buildings, machines and equipment to companies for the use in their
in the company’s operations;
5. amount of the considerations of commercial lease transactions of legal entity;
6. machines, equipment and other goods incorporated to the fixed assets acquired or
manufactured to be leased to third parties or used in the manufacturing of goods intended
for sale or in the rendering of services;
7. buildings and betterment in own real property or real property of third parties
used in the corporate activities;
8. goods received in return;
9. storage of good and freight in the sale transaction, for cases (i) and (ii), when the burden is supported by the seller.
The credits may be used by the company in order to reduce PIS and PASEP that levy on the revenues proceeding from other subsequent transactions. This form does not apply to the cooperative organizations, immune or exempt companies, companies taxed by income tax based on the assumed or arbitrated profit, legal entities that have adopted the SIMPLES [Unified Tax Collection System], to the revenues arising out of rendering of telecommunication services, arising out of services of call center, telemarketing, phone collecting and phone services companies in general, among others.
In regard to the taxpayers that are subject to higher tax rates pursuant to the single-phase system of the PIS and PASEP, such as the pharmaceutical and auto industries, pursuant to Law No. 10865 of April 30, 2004 they then are entitled to credits under the non-accumulation system.
Further, there exists an express provision determining that PIS and PASEP does not apply over the revenues resulting from the export of products to abroad, supply of services to an individual or company domiciled abroad, whose payment represents the inflow of foreign currency and over the revenues of sales to trading companies with the specific purpose of export. Another important aspect concerns the reduction to zero of the tax rate of these contributions over the financial revenues (except those pursuing from interest on own capital and hedge) as of August 2004, provided that the taxpayer is covered in the non-accumulation system of the tax.
PIS and PASEP-Import
Moreover, Law No. 10865/04 introduced the taxation of PIS and PASEP on imported products and services. This law determines that PIS and PASEP are due in the entry of foreign goods in Brazil and in the payment, crediting, delivery, the use or remittance of amounts to foreign residents or living abroad as payment for the services supplied.
The taxpayers are all the importers and companies or people that contract the services of people or companies living abroad. The general tax rate of the PIS and PASEP – Import contributions are 1.65% and the tax basis shall be as follows:
- Value for customs purposes adopted as the tax basis in the import tax, plus the State Sales tax (ICMS) and the PIS and COFINS amounts. In the import of services the tax basis is the price of the service plus Service tax (ISS) and the PIS and COFINS contributions.