Understanding Withholding Taxes for Brazil

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Businesses in Brazil must calculate withholding taxes for the service notas fiscais that they receive. These taxes are calculated on an aggregate basis for corporate entities and on a retention basis for individuals. When calculated on an aggregate basis, the tax is added to the basis of the total amount on the nota fiscal or voucher. The tax is remitted to the government, not to the supplier. When calculated on a retention basis, the tax is an amount that is withheld from the nota fiscal or voucher. In this situation, a portion of the amount that is due to the supplier (the tax) is remitted to the government instead of to the supplier. You must calculate withholding taxes before you process vouchers, and then you must post the vouchers after you calculate the taxes.

After the system calculates the taxes, you can generate reports and electronic files to meet legal requirements. You generate a weekly collection report and an annual report that informs the federal Department of Revenue of the individuals and legal entities for which you calculated taxes.

The system calculates these withholding taxes:

Tax	Explanation
IR (Imposto de Renda)	A federal income tax that is levied on services that are provided by individuals or legal entities. Imposto de Renda de Pessoa Física (IRPF) is IR tax levied on individuals. For most services, the taxable income is the value of the service that is provided. Imposto de Renda de Pessoa Jurídicais (IRPJ) is the IR tax that is levied on legal entities. For corporate entities, the tax rate varies, according to the type of service.
ISS (Imposto sobre Serviços)	A tax that is defined by the city of origin of the job or service.
INSS (Instituto Nacional do Seguro Social)	The national social security tax. Some types of services are subject to INSS tax. The tax amount is added to the value of the provided service.
FUNRURAL (Fundo de Assistência e Previdência do Trabalhador Rural)	The income tax for agricultural businesses. It is similar to the IR tax for corporations, but the rate at which the income is taxed is different.
PIS/PASEP (Programa de Integração Social/Programa de Formação do Patrimônio do Servidor Público)	A mandatory contribution that is levied as a percentage of monthly billings. The PIS contribution is made to Brazilian social programs by private companies and enterprises. The PASEP contribution is made to Brazilian social programs by public or government entities.
COFINS (Contribuição para Financiamento da Seguridade Social)	A mandatory contribution that is levied as a percentage of monthly billings on merchandise and services.
CSLL (Contribuição Social sobre o Lucro Líquido)	A tax on net gains.

Note: Where a difference exists between how IR taxes for individuals and legal entities are processed, this document refers to IR taxes for individuals as IRPF and refers to IR taxes for legal entities as IRPJ. Where no difference exists between how the system processes IR taxes for individuals and legal entities, this document uses the acronym IR.

The applications that you use to calculate Brazilian withholding taxes read data from these tables:

Accounts Payable Ledger (F0411).
Address Book Brazilian Tag File (F76011).
Nota Fiscal Header - Brazil (F7601B).
Nota Fiscal Detail - Brazil (F7611B).
Item Master Regional Information - Brazil (F76411).
Item Branch Regional Information - Brazil (F76412).
Purchase Order Detail Tag File - Brazil (F76432).
Tax Code (F76B0401).
IR Progressive (F76B0402).
Voucher Additional Information Brazil (F76B0411).
Services Taxes Paid Externally (F76B0403).

Results of the tax calculations are stored in these tables:

Accounts Payable Ledger (F0411).
Account Ledger (F0911).
Voucher Additional Information Brazil (F76B0411).
Voucher Tax Processed (F76B4012).
Tax Accumulates by AN8 (F76B4016).
Tax Accumulates by AN8, Company (F76B4017).