(BRA) Setting Up the System for Brazilian Taxes

This chapter provides an overview of the system setup for processing Brazil taxes, and discusses how to:

• Set up user-defined codes (UDCs).

• Set up automatic accounting instructions (AAIs).

• Set up transaction nature codes.

• Set up ICMS and IPI taxes.

• Set up for PIS/PASEP and COFINS tax credits.

Understanding Setup for Brazilian Taxes Processing

Before the JD Edwards EnterpriseOne systems can calculate Brazilian taxes, you must set up the tax tables, UDCs, AAIs, and other information that the system needs to perform the calculations. In Brazil, sales and use taxes are calculated on both inbound (procurement) and outbound (sales) transactions.

You can set up the system to perform calculations for these taxes:

• IPI (Imposto sobre Produtos Industrializados).

• ICMS (Imposto sobre Circulaço de Mercadorias e Serviços).

• ICMS Substitution (Imposto sobre Circulaço de Mercadorias e Serviços Substituto).

• ISS (Imposto sobre Serviços).

• PIS/PASEP (Programa de Integração Social/Programa de Formação do Patrimônio do Servidor Público).

• COFINS (Contribuiço do Financiamento para Seguridade Social).

Setting Up UDCs

You must set up country-specific UDCs to process taxes for Brazil.

See Setting Up UDCs for Tax Processing for Brazil.

Setting Up AAIs

In addition to the standard AAIs that you set up for the system, you must set up distribution AAIs to account for Brazilian taxes. For example, you must set up AAI 4385 for debits and AAI 4390 for credits for PIS/PASEP and COFINS taxes.

See Setting Up AAIs for Tax Processing for Brazil.

Setting Up Transaction Nature Codes

This section provides an overview of transaction nature codes and discusses how to set up transaction nature codes.

Understanding Transaction Nature Codes

The transaction nature code is a 3-character code that has a 2-character suffix. You set up transaction nature codes to identify whether a transaction is inbound, outbound, in-state, cross-border, and so on. The Brazilian government specifies the codes that apply for each type of transaction.

After you set up transaction nature codes, you can associate online text, print text, or both.

Note. If you need to delete a transaction nature code, you must first delete the online text, the print text, or both.

Prerequisite

Verify that the UDC tables for IPI Code - Fiscal Value (76/IP), ICMS Code - Fiscal Value (76/II), and ICMS Tax Substitution Markup (76/SM) are set up.

Forms Used to Set Up Transaction Nature Codes

Adding Transaction Nature Codes

Access the Transaction Nature form.

Transaction Nature	Enter a 3-character code that for tax purposes identifies a type of transaction. To enter values for the transaction nature code, use this convention: X.YY. X defines the origin of the transaction (inbound or outbound). Values for X are: 1: Inbound, inside the state. 2: Inbound, other states. 3: Inbound, import. 5: Outbound, inside state. 6: Outbound, other states. 7: Outbound, export. YY defines the transaction as a whole, such as a sales transaction. Examples of transaction nature codes include: 511: In-state sale. 611: Out-of-state sale.
Transaction Suffix	Enter a value to complete this 2-character field in conjunction with the transaction nature code to identify the complementary implications of a type of transaction. For example, the suffix might indicate that a certain type of transaction represents an inventory change, or that a transaction is eligible for a certain type of tax. Values might include: 01: Bonus 02: Demo 03: Sample 04: Return merchandise 05: Back order 06: Donation Examples of Transaction Nature codes with suffixes include: 511 01: In-state sale, bonus. 511 05: In-state sale, back order.
DIPI Classification	Enter the DIPI Classification code, which is a 4-character, alphanumeric field that you can use for tax reporting. Use this code to link the product with the Transaction Nature code.
ICMS Code	Enter a code that indicates how ICMS tax is applied. You set up the codes that you need in the ICMS Code - Fiscal Value UDC (76/II). The system uses the code when it calculates ICMS tax, and when printing fiscal books.
ICMS Substitution	Enter a code that specifies whether a client or product is subject to tax substitution. Values are: Y: Use list price. Z: Use net price. N: No.
IPI Code	Enter a code that indicates how IPI tax is assessed. This code determines in which column of the Inbound/Outbound Fiscal Book the system prints the IPI tax amount. You must enter a code that exists in the IPI Code Fiscal Value (76/IP) UDC table. Values are: 1: Taxable 2: Exempt or not taxable 3: Other
Special ICMS TAX FLAG	Select to enable the ICMS Tax Situation Code field.
ICMS Tax Situation Code	Enter a value that exists in the Tax Summary (76/ST) UDC table to specify a special tax situation. Examples of the hard-coded values are: 40: Exempt 41: Not taxed 50: Suspended

Setting Up ICMS and IPI Taxes

This section provides overviews of ICMS tax, ICMS substitution tax, IPI tax, and tax codes; lists prerequisites; and discusses how to:

• Set up tax codes.

• Set up ICMS tax rates.

• Set up IPI tax rates.

• Associate ICMS and IPI codes with customers, suppliers, and branch/plants.

• Set up ICMS and IPI information in the Item Master table.

Understanding ICMS Tax

ICMS is a state tax that the government levies on purchasing and sales transactions in Brazil. The tax rate varies from state to state, and some products can be taxed at different rates. The price of the product always includes ICMS tax, but the amount of this tax also appears on the nota fiscal.

When you set up ICMS tax rates, you must complete these fields in the ICMS Tax Revision program (P7608B) before the system can calculate the ICMS differential:

• From State

• To State

• ICMS State Tax

• ICMS Interstate Tax

The system applies tax rates by exception. Set up all of the general tax rates first. Then, if a transaction has special or unique settings, use the ICMS Tax Revisions program to set up the ICMS tax on a case-by-case basis. Enter the data of the transaction as a record, and then enter the exceptions.

Understanding ICMS Substitution

In Brazil, ICMS Substitution is ICMS tax that is charged on interstate transactions, or on special products and clients. Although this tax appears to be the same as ICMS, it is applied differently.

The rates are the same rates that are used by the ICMS calculation. A markup is applied to the price of the supplier to forecast the price that will be charged in the next transaction.

You enter ICMS substitution rates on the same forms as you enter ICMS tax rates.

Understanding IPI Taxes

You use the IPI Tax Revision program (P76B18) to set up the tax rates and tax reductions that the system uses to calculate the IPI tax that you pay to the customers and suppliers. You can set up IPI tax rates by fiscal classification. You can also set up a default IPI tax rate that applies to all customers and suppliers.

Understanding Tax Codes

You use the Tax Code Revision program (P7617B) to set up tax codes to define the taxes that apply to an item. The tax codes that you set up determine the ICMS and IPI taxes that apply to the item. When you enter a purchase or sales order for the item, the system uses the tax code from the Item Branch Regional Information - Brazil table (F76412). If the tax code does not exist in the F76412 table, the system uses the tax code from the Item Master Regional Information - Brazil table (F76411).

Prerequisites

Before you complete the tasks in this section:

• Verify that the UDC tables for IPI Code - Fiscal Value (76/IP), ICMS Code - Fiscal Value (76/II), and Tax Code (76/CT) are set up.

• Verify that the appropriate keywords are set up in UDC table 76/GL, translating the item GL/class code to the one that will be used by the accounting process.

• Verify that the appropriate AAIs are set up.

• Set up the second character in the special handling code to recover or not recover the ICMS in UDC table 76/PU.

• Verify that codes for ICMS are set up in the Tax Code Revision program (P7617B).

• Verify that the ICMS code, the IPI code, and the ICMS Substitution fields are completed for the appropriate transaction nature codes.

Forms Used to Set Up ICMS and IPI Taxes

Setting Up Tax Codes

Access the Tax Code Revisions form.

Tax Code	Enter an auxiliary code that you use to combine ICMS and IPI tax characteristics. The code that you specify must exist in the Tax Code UDC table (76/CT). Values might include: 01: Taxed domestic goods (IPI and ICMS) 02: Taxed domestic goods (ICMS taxed, IPI tax rate Zero) 03: Exempt products 04: Export 05: ICMS deferred, IPI suspended 06: ICMS exempt, IPI taxed
ICMS Code	Enter a code that indicates how ICMS tax is applied. You set up the codes that you need in the ICMS Code - Fiscal Value UDC (76/II). The system uses the code when it calculates ICMS tax, and when printing fiscal books.
IPI Code	Enter a code that indicates how IPI tax is assessed. This code determines in which column of the Inbound/Outbound Fiscal Book the system prints the IPI tax amount. You must enter a code that exists in the IPI Code Fiscal Value (76/IP) UDC table. Values are: 1: Taxable 2: Exempt or not taxable 3: Other

Setting Up ICMS Tax Rates

Access the ICMS Tax Revision form.

From State	Enter a value that exists in the States (00/S) UDC table to specify the originating state for which you set up the tax.
To State	Enter a value that exists in the States (00/S) UDC table to specify the destination state for which you set up the tax.
Mark-up Level	Enter a value that exists in the A/B Selection Code 30 (01/30) UDC table to specify a code that is used in conjunction with an Address Book Category code to create different ICMS Substitution markup tables depending on the customer markup level. This field cannot be left blank. To make this field a blank space, enter an asterisk (*).
Item Number	Enter the item number if you want to set up the ICMS tax by item. This field is optional for ICMS tax. Complete this field only to set up ICMS tax rates for specific items.
ICMS State Tax and ICMS Interstate Tax	Enter a number that identifies the percentage of tax that should be assessed or paid to the corresponding tax authority, based on the tax area. Enter the percentage as a whole number and not as the decimal equivalent. For example, to specify 7 percent, enter 7, not .07.
ICMS Reduction	Enter a factor that the system uses to reduce the amount of the taxable base of a product.
Substitution Mark-up	Enter a percentage of markup applied to the ICMS taxable amount.
Substitution Reduction	Enter a factor that reduces the ICMS substitution tax amount.

Setting Up IPI Tax Rates

Access the IPI Tax Revision form.

Fiscal Classification	Enter a code that specifies groups of products, as defined by the local tax authorities. The product groups are based on taxing conventions and other national statistics. The system uses this code to determine the applicable tax rate for a product.
Print Message	Enter a code from UDC 40/PM that you assign to each fiscal print message that appears on the nota fiscal.
Item Number	Enter a number that the system assigns to an item. It can be in short, long, or third-item number format.
IPI Tax and IPI Reduction	Enter a number that identifies the percentage of tax that should be assessed or paid to the corresponding tax authority, based on the tax area. Enter the percentage as a whole number and not as the decimal equivalent. For example, to specify 7 percent, enter 7, not .07. For IPI tax, complete this field to identify a tax rate for a tax authority that has jurisdiction in a geographic area.
ICMS Code	Enter a code that indicates how ICMS tax is applied. You set up the codes that you need in the ICMS Code - Fiscal Value UDC (76/II). The system uses the code when it calculates ICMS tax, and when printing fiscal books. Complete this field to associate tax information with the fiscal classification.
IPI Code	Enter a code that indicates how IPI tax is assessed. This code determines in which column of the Inbound/Outbound Fiscal Book the system prints the IPI tax amount. You must enter a code that already exists in the IPI Code Fiscal Value (76/IP) UDC table. Values are: 1: Taxable 2: Exempt or not taxable 3: Other Complete this field to associate tax information with the fiscal classification.

Associating ICMS and IPI Codes with Address Book Records

Access the Address Book Additional Information - Brazil form.

Complete the ICMS Code field on the Fiscal Information tab with the appropriate ICMS tax code, and complete the IPI Code field with the appropriate IPI tax code.

See (BRA) Entering Tax Information for Address Book Records.

Setting Up ICMS and IPI Information in the Item Master Table

Access the Item Branch Regional Information - Brazil form.

Complete these fields with the appropriate values for the item master:

• Fiscal Classification

• Tax Code

• Purchase Use

See Understanding Item Master Information.

Setting Up for PIS/PASEP and COFINS Tax Credits

This section provides overviews of the 76/GL UDC table, GL Class codes, tax codes, how to associate purchase use codes with tax codes, and tax line types for PIS/PASEP and COFINS tax credits; lists a prerequisite; and discusses how to:

• Set up tax codes for PIS/PASEP and COFINS tax credits.

• Associate purchase use code with tax codes.

Understanding the 76/GL UDC Table for PIS/PASEP and COFINS Tax Credits

For PIS/PASEP and COFINS tax credits, you set up codes in the GL/Class Code Cross-Reference (76/GL) UDC table to create cross-references between GL offset accounts and GL classes for suppliers, fiscal companies, and tax codes instead of setting up a cross-reference between the GL offset account and the GL class for an item or service.

When you set up the GL/Class Code Cross-Reference UDC for PIS/PASEP and COFINS tax credits:

• Complete the Codes field by entering the first three characters of the tax name followed by 4 characters that represent the GL category code that is associated with the company/transaction type/account combination for the AAI.

  Note. For PIS/PASEP tax credits, you must enter PIS for the first 3 characters for PIS tax credits and COF for the first 3 characters for COFINS tax credits.

  The first three characters of the codes must be completed as:

  Tax, Cost, or Discount	Code
  COFINS	COF
  ICMS Differential	DIF
  Expenses	EXP
  Freight	FRT
  ICMS	ICM
  ICMS Recoverable	ICR
  IPI	IPI
  IPI Recoverable	IPR
  PIS/PASEP	PIS
  ICMS Repasse Discount	REP
  ICMS Substitution Recoverable	SBR
  Insurance	SEG
  ICMS Substitution Tax	SUB
  Trade Discount	TDC

• Create codes for default AAIs that point to a specific default account. The system first searches for a code with a specific GL class in the last four characters (for example, COFGL30, where GL30 is the supplier's GL class). If a specific code that includes the item's GL class does not exist, then the system locates the default code (for example, COF****).

• Complete the Description 01 field with the GL category code that is associated with the GL offset account for the JD Edwards EnterpriseOne Distribution system AAI to which the system posts the transaction.

See Setting Up UDCs for Procurement Processing for Brazil.

Understanding GL Class Codes for PIS/PASEP and COFINS Tax Credits

You must set up GL Class codes for PIS/PASEP and COFINS tax credits for the suppliers. Additionally, because you are the supplier when you sell goods or services, you must set up a supplier master for the fiscal companies and GL Class codes for the fiscal companies. Before the system can calculate PIS/PASEP and COFINS tax credits for purchase and sales transactions, the supplier master records for the suppliers and for the fiscal companies must contain a GL Class code for PIS/PASEP and for COFINS tax credits. You assign a GL Class code on the GL Distribution tab of the Supplier Master Revisions form.

See Entering Supplier Master Information.

The source of the GL Class code that the system uses when calculating PIS/PASEP and COFINS tax credits depends on the type of transaction that the system processes. Inbound transactions include transactions that have Transaction Nature codes that are less than 500. Inbound transactions include those in which you generate notas fiscais from purchase orders, ship-to sales returns, and ship-from sales returns. Outbound transactions include transactions that have Transaction Nature codes that are greater than 500. Outbound transactions include those in which you generate notas fiscais from sales orders and purchase returns.

This table displays the source of the GL Class code that the system uses when debiting or crediting accounts for inbound and outbound transactions:

Understanding Tax Codes for PIS/PASEP and COFINS Tax Credits

The Review AP Tax Code program (P76B0401) enables you to set up tax codes that the system uses to calculate tax credits on notas fiscais. After you set up tax codes in the Review AP Tax Code program, you associate the tax codes with the suppliers on the Tax Information tab of the Address Book Additional Info - Brazil program (P01012BR). You use the Purchase Use Tax Setup - Brazil program (P76B003) to associate purchase use codes with the tax codes. The system uses the associations between the tax codes, purchase use codes, and suppliers to determine how to apply PIS/PASEP and COFINS tax credits.

Note. You must enter a C in the Retention/Aggregation/Credit field (data item BRRTA) for tax codes that you set up for PIS/PASEP and COFINS tax credits. Tax codes that have an R or an A in the Retention/Aggregation/Credit field are not valid tax codes for PIS/PASEP or COFINS credits.

Understanding How to Associate Purchase Use Codes with Tax Codes

You use the Purchase Use Tax Setup - Brazil program (P76B003) to set up associations between purchase use codes and tax codes for PIS/PASEP and COFINS tax credits. When you run the Nota Fiscal Check & Close program (P76B900) or the Generate Nota Fiscal - Brazil program (R76558B), the system accesses the associations between the purchase use codes and tax codes to determine whether to calculate the taxes. If an association exists in the Purchase Use Tax Setup - Brazil table (F76B003) between a tax code and the purchase use code on a line item, the system calculates the tax as specified by the tax code. When you set up the associations, select the appropriate Apply option to instruct the system to calculate the tax.

Note. The Purchase Use Tax Setup Revisions form in the Purchase Use Tax Setup - Brazil program has a section for setting up tax credits and a section for setting up withholding. Use the fields in the Taxes Information section to associate purchase use codes with tax codes for tax credits.

Understanding Tax Line Types for PIS/PASEP and COFINS Tax Credits

Before the system can process PIS/PASEP and COFINS tax credits, you must set up line types for the taxes in the Line Type Constants program (P40205). When you set up line types for PIS/PASEP and COFINS, set the options on the Line Type Constants Revisions form as:

Prerequisite

Verify that the tax codes for withholding taxes are set up in the Tax Code AP UDC table (76B/TR).

Forms Used to Set Up Tax Codes for PIS/PASEP and COFINS Tax Credits

Setting Up Tax Codes for PIS/PASEP and COFINS Tax Credits

Access the Tax Information Revisions form.

Select the PIS tab to set up tax codes for PIS/PASEP tax credits. Select the COFINS tab to set up COFINS tax credits.

Brazil Tax Information	Enter a UDC that describes the tax. The code can be up to 8 characters long.
Tax Type	Enter the type of Brazilian tax. You enter a code that exists in the Tax Code AP UDC table (76B/TR). You must enter 05 for PIS/PASEP or 06 for COFINS. The system activates the tax tab based on the value that you enter.
Tax Rate	Enter the retention or aggregation tax rate that is applied to the service transaction.
GL Offset (general ledger offset)	Enter a code that determines the trade account that the system uses as the offset when you post invoices or vouchers. The system concatenates the value that you enter to the AAI item RC (for JD Edwards EnterpriseOne Accounts Receivable) or PC (for JD Edwards EnterpriseOne Accounts Payable) to locate the trade account. For example, if you enter TRAD, the system searches for the AAI item RCTRAD (for receivables) or PCTRAD (for payables). You can assign up to four alphanumeric characters to represent the GL offset or you can assign the 3-character currency code (if you enter transactions in a multicurrency environment). You must, however, set up the corresponding AAI item for the system to use; otherwise, the system ignores the GL offset and uses the account that is set up for PC or RC for the company specified. If you set up a default value in the GL Offset field of the customer or supplier record, the system uses the value during transaction entry unless you override it. Note. Do not use code 9999. It is reserved for the post program and indicates that offsets should not be created.
Retention/Aggregation/ Credit	Enter a value that specifies whether retention or aggregation applies. You must enter a C in the Retention/Aggregation/Credit field (data item BRRTA) for tax codes that you set up for PIS/PASEP or COFINS credits. Tax codes that have an R or an A in the Retention/Aggregation/Credit field are not valid tax codes for PIS/PASEP or COFINS credits.
Alternate Payee Address Number	Enter an alternate address to which JD Edwards EnterpriseOne Accounts Payable can send payments due.
Receita Code	Enter a code that identifies the type of IR tax. You must set up valid codes in the Recieta Code UDC (76B/IR) table.
Payment Terms	Enter a code that specifies the terms of payment, including the percentage of discount available if the invoice is paid by the discount due date. Use a blank code to indicate the most frequently used payment term. You define each type of payment term on the Payment Terms Revisions form. Examples of payment terms include: Blank: Net 15 001: 1/10 net 30 002: 2/10 net 30 003: Due on the 10th day of every month 006: Due upon receipt. This code prints on customer invoices.

Associating Purchase Use Code with Tax Codes

Access the Purchase Use Tax Setup Revisions form.

Purchase Use Code	Enter a value that exists in the Purchase Use (76/PU) UDC table to specify the purchase use code with which you want to associate tax codes.
PIS	Complete this field in the Taxes Information section. Enter a tax code that contains 05 in the Tax Type field (data item BRTXTP) and C in the Retention/Aggregation/Credit field (data item BRRTA) in the F76B0401 table. Only tax codes that contain 05 in the Tax Type field and C in the Retention/Aggregation/Credit field are valid for PIS/PASEP tax credits. If the tax code that you enter does not contain 05 and C, the system displays an error message.
Apply PIS	Complete this field in the Taxes Information section. The system enables the Apply PIS field only when you complete the corresponding PIS field. You must select this option to have the system calculate PIS/PASEP credits based on the code that you entered in the PIS field.
COFINS	Complete this field in the Taxes Information section. Enter a tax code that contains 06 in the Tax Type field (data item BRTXTP) and C in the Retention/Aggregation/Credit field (data item BRRTA) in the F76B0401 table. Only tax codes that contain 06 in the Tax Type field and C in the Retention/Aggregation/Credit field are valid for COFINS tax credits. If the tax code that you enter does not contain 06 and C, the system displays an error message.
Apply COFINS	Complete this field in the Taxes Information section. The system enables the Apply COFINS field only when you complete the corresponding COFINS field. You must select this option before the system will calculate COFINS credits that are based on the code that you enter in the COFINS field.