Import tax: know what it is and how the calculation is done

  • 20/06/2024
  • 16 minutes

The growth of global trade is one of the main drivers for the internationalization of companies in the market. However, this is not a simple journey, but one full of challenges, standards and technicalities. To ensure the competitiveness of your operation in the market, today we will talk about Import Tax. 

In this content, we have compiled the most critical and fundamental information on the subject. Here, you will understand what this tax is, what its function is, its characteristics, calculations and more. Keep reading it!

What is Import Duty?

The Import Tax (II) is a federal tax applied to every product imported into the Brazilian economy. Upon arriving in Brazil, foreign goods suffer the inclusion of this tax, increasing its cost to the domestic consumer. In addition to promoting collection for the State, taxation has a protectionist character. 

Basically, the purpose of this tax is to make imported products more expensive, thereby favoring Brazilian companies and producers, acting as a mechanism to protect the national industry. That is, collection serves as a way to intensify competition from national solutions in the domestic market. 

In addition to protecting Brazilian producers from international competitive pressure, Import Tax is also seen as an important form of revenue for the Federal Government, generating income to finance programs in various areas of the Brazilian economy, particularly education, health, and infrastructure.

Largely, the Import Tax (II) is regulated by mechanisms such as the Common External Tariff (TEC), which is an agreement among Mercosur countries to establish common tariffs through the Mercosur Common Nomenclature (NCM) — in addition to other treaties and equivalent solutions for products originating from North America, Asia, and Europe.

What are the other import taxes?

But here, it is worth noting that (II) is not the only tax inherent in importing goods into Brazil. In fact, companies bear and pass on a number of other costs when importing, such as:

  • IPI – Industrialized Products Tax;
  • Cofins – Contribution for the Financing of Social security;
  • PIS – Social Integration Program.

In the end, all these fees contribute to the composition of the final price. Technically, the Import Tax is an important mechanism for the State, and challenging for companies. For those who operate internationally, understanding II is essential, especially to develop an efficient strategy for entering a new market.

What is the function of the Import Tax?

Protectionism and collection. As we understand it, these are the only two objectives of the Import Tax.

And here, it is worth noting the universality of this practice, which is not only exclusive to the Brazilian economy, but to most countries in the world. In reality, the Import Tax is an important mechanism for defining economic relations in the world. 

  1. Protection

The first objective is to protect the national economy. By making imported products more expensive, II favors the local industry. Basically, this means that domestic producers are not harmed by competition from similar goods from other countries, which have a lower cost of production. Thus, the Brazilian industry does not lose its competitiveness.

In addition, II can also serve as an anti-dumping instrument. Dumping is the unfair practice of international trade, in which a company exports a product for a price lower than that practiced in its local market. By applying higher rates on dumped imported goods, the country protects its industries from unfair competition.

  1. Collection

The second objective is to expand the collection base. Even though Brazilian products are more competitive due to the price, this in itself does not cause the market to stop selling foreign products. Therefore, companies and consumers who still buy the solutions from outside end up paying a valuable revenue to the State. 

In scenarios of good management, these resources can be used virtuously and efficiently by the State, funding development programs in healthcare, education, infrastructure, and so forth, and can even be used in projects that favor the development of the national industry. 

What are the main characteristics of the Import Tax?

In addition to knowing the importance and purpose of the II, it is also worth knowing some special characteristics of this tax. In fact, knowing these details is precisely what allows you to develop effective strategies for your performance in the market with this type of merchandise — see!

Federal and ad valorem

The first point to note is that II is a federal tax, whose collection is made and destined to the Union, and not to the states or municipalities. In addition, the Import Tax is considered an ad valorem rate — that is, the value of the tax is calculated based on the value of the imported goods, and not on a fixed value previously stipulated. 

Variations according to the Mercosur Common Nomenclature

For better organization and proper calculation, the products are classified according to the Mercosur Common Nomenclature (NCM), a system that serves to identify the nature of the products. Thus, each commodity has a specific tax rate based on its NCM classification. 

Instability and change

The Import Tax is always subject to change, both in terms of rates and regulations. Factors such as free trade agreements, anti-dumping measures or changes in trade policy can influence this rate. Therefore, for those who work with imported goods, it is essential to keep up to date with changes in the tax system.

What is the Taxable Event of the Import Tax?

The Triggering Event is the moment that gives rise to a tax obligation. In the case of II, the taxable event is intrinsically linked to the import process as a whole, as it occurs at the exact moment when the goods land in Brazilian territory. In the act, customs clearance occurs, which is the procedure for releasing the goods through customs.

This is the time when the importer must pay the tax and submit documentation describing the nature, quantity, origin and value of the goods. As it is ad valorem, the tax is calculated based on the customs value of the goods, a concept that is composed of the value of the goods, transport costs and international insurance, if any. 

Who are the active and passive subjects of the Import Tax?

In any tax transaction, there are two agents: the active subject and the taxpayer. The two play different and important roles in the tax process, but both are fundamental to the functioning of the import tax structure.

In the case of Import Tax, the assignment occurs as follows: 

  • the Active Subject is the Federal Government, which is the competent sphere for the collection and collection of this fee, which exercises this role through the RFB, the Federal Revenue of Brazil; 
  • the Taxpayer is the individual or legal entity that carries out the import operation and that, therefore, is obliged to discharge the tax in question. 

How is the Import Tax calculated?

Basically, the calculation takes into consideration two fundamental factors: the customs value and the Import Tax rates, according to the product classification within the Mercosur Common Nomenclature (NCM). 

Customs value

The customs value is the basis on which the rate will be applied. In Brazil, this value is determined according to the parameters established in the Customs Valuation Agreement.

Generally, the value is composed of the value of the product, freight and international insurance. When there is no specific declared value for these last two components, they can be stipulated through previously defined percentages.

Import Tax Rates

The rate is the percentage applied to the Customs Value. This percentage varies according to the classification of the goods according to the Mercosur Common Nomenclature (NCM). At the time of writing, in November 2023, the rates vary between 0% and 35%, and are stipulated by the Mercosur Common External Tariff (TEC).

Here, it is important to emphasize the variability of these rates according to the economic, political, commercial and strategic situation of the country.

That is to say, the rates can vary according to specific situations, with changes justified by measures of commercial defense (such as antidumping duties, countervailing duties, and safeguards), drawback operations (customs procedures that allow for the refund of taxes paid on imported inputs), and so forth. 

Calculation example 

In the end, the calculation turns out to be quite simple, as it is enough to multiply the customs value by the rate to be practiced according to the classification of the product in the NCM.

To put it simply, we can create a fairly summarized hypothetical scenario. Imagine a cargo in which the customs value is R$1 million, and the tax rate is 35%. 

The calculation of II is essentially:

  • Import Tax = Customs Value x Tax Rate see NCM; 
  • Import Tax = R$1,000,000 x 0.35;
  • Import Tax = R$350 thousand.

In this hypothetical scenario, this would be the amount to be paid in the customs clearance of the goods upon their arrival in Brazil. Therefore, for those who work with imported goods, understanding different tax rates, NCM classifications, cabotage solutions, and tax updates is fundamental for strategic operations in the market. 

As you can see, it is necessary to understand the importance and functioning of the Import Tax to establish an efficient market strategy. Therefore, we always emphasize the importance of having specialists in topics like this, as it is this type of expertise that allows the preparation of a strategy that meets your expectations. Now that you have a complete understanding of Import Tax, take the opportunity to delve into another essential topic for your market performance, checking everything you need to know about customs inspection!