1. History of Taxation in Brazil
  2. Categories of  Taxes in Brazil
  3. Sources of Taxation in Brazil
  4. Federal Taxes

4.1  Income Tax

4.2  Tax Land

4.3  Import Tax

4.4  Export Tax

4.5  Federal VAT- Industrialized Products

4.6  Tax on Financial Transactions

4.7  Large Fortunes

4.8  Federal Contributions

  1. State Taxes

5.1  Circulation of Goods (ICMS)

5.2  Ownership of Automobile Vehicle

5.3  Transfer by Death or Donation of Property or Rights

  1. Municipalities Taxes

6.1  Urban Buildings and Land Property

6.2  Intervivos Transfer

6.3  Services of Any Nature

  1. Federal Tax Administration- The Brazilian Revenue Service
  2. Federal Tax Procedure




An Overview on the Brazilian Tax System

Arnaldo Moraes Godoy, Humphrey Fellow 2002/03 at Boston University.




                                                The Brazilians are great people for telling stories on themselves.

                                                John dos Passos, Brazil on the Move  


The purpose of this paper is to provide an overview on the Brazilian tax law system to American lawyers, investors and scholars with some degree of interest in the largest South American country. Brazil is very urban: 57 percent of its 180 million inhabitants live in cities of 100,000 or more[1]. In the short span of the last decade Brazil has made dramatic progress in spite of the country’s shocking social inequalities. Democracy seems to be there to stay. A former union activist took office in the year 2003 after winning the last presidential election.

American academia has had a long lasting relationship with Brazil. The so-called Brazilianists such as Jordan Young[2] and Thomas Skidmore[3], to name only a few, have written extensively about this intriguing country. However, in spite of the efforts and papers of Catherine Tinker, a brilliant environmental lawyer from New York City who has been periodically lecturing in Brazil[4], not much has been done in the field of law.

As far as Brazilian law is concerned, there are a few papers written in Portuguese by Brazilian scholars, rendered into English, albeit originally prepared for Brazilian readers. Those essays are full of jargon and particular approaches[5]. Those papers simply can not be easily understood by the American audience. The blame, if there is one, might be ascribed to those who do not see (or rather do not want to see) that two different law systems do not speak the same language. I am talking about legalese[6]. Aside from the natural language barrier there is also a big wall whose bricks and stones are made of legal misinterpretations. In order to fill this cultural gap, Boaventura de Sousa Santos, a prominent Portuguese scholar who teaches in the United States, conceived of the idea of diatopical hermeneutics. One must build bridges in order to provide understanding among different patterns of law[7].

The Brazilian law system has a civil law background. It is fundamentally statutory as opposed to the American model, essentially common law in its framework. This notwithstanding the fact that the idea of judge made law has gained force in the Brazilian procedure as well as the fact that certain legislative inflation has been seen in the American panorama. The present essay has the inglorious aim of translating the Brazilian tax law system to American readers, providing an overview and suggestions for further research.

Although somewhat suspicious of using history for understanding law[8], I must admit that because taxation is both a political and an economic tool, it has a historical contingency. Law is not logic, it is an experience[9] that unfolds itself in history. Hence, this essay starts with an outline of the evolution of taxation in Brazil from the Portuguese monarchy to date. Following that, there is an inventory of the categories used by Brazilian tax lawyers, judges, accountants and tax payers. It is illuminating to consider the idea of limitations on the power to tax, taxable events, tax liability, assessment, credit, limitations, laches. There are many categories of internal revenues that may be levied on entities and individuals, like taxes, fees, betterment fees, social contributions and so forth.  The statutory sources of taxation will be analyzed. Both the Brazilian Constitution and the national tax code will be brought to consideration in order to explain the adopted concept of lawfulness. It seems that Brazilian tax lawyers want to reverse the pace of reality. For them, or for most of them, tax law is a technical realm not a political set.  Rhetoric is embedded in the Brazilian tax law discussions. The American concept of voluntary compliance is unknown to Brazilian tax law. 

Federal taxes will be explained.  According to the Brazilian Constitution the federal government can levy several internal revenues such as the income tax, the tax land, the import tax, the export tax, taxes on industrialized products (a sort of federal VAT), taxes on financial transactions and taxes on large fortunes ( not yet implemented ). There are federal contributions that have a great financial impact on corporations. The state taxes also will be identified. The Brazilian states can levy taxes on the circulation of goods, on the ownership of automotive vehicles, on the transfer by death or donation of property or rights. Municipalities[10] can levy taxes on urban buildings and land property, transfer of property and services of any nature.

Due to the variety of states and municipalities, this paper will only explore the federal tax bureaucracy, that is, the Brazilian revenue service, under the direction of the Ministry of Finance. The organization, commissioners, auditors and attorneys will have their duties explained. Between the lines one reads the author’s concern with the deficiencies of the Brazilian tax system. The Brazilian pattern somehow enhances the evading of taxes. This behavior dramatically takes away from the country’s resources and assets that are necessary to meet the challenges it faces. In a nutshell, the paper intends to present the Brazilian tax system in order to shed light on a tug of war which is played between tax payers and government agents bellow the equator. The tax issue marks a watershed in Brazilian sustainable development.


1.      History of Taxation in Brazil 

Brazil is unique in the context of South America due to its Portuguese heritage. Brazilians do speak Portuguese[11]. The pattern of colonization, however, does not differ too much from the model the Spaniards impose in Latin America, from Mexico to Patagonia. After 1530 the Portuguese founded several spots of commerce, named feitorias, where bureaucrats were allowed to levy taxes on the famous Brazilian wood[12]. A bracket of 20 percent ( quinto ) was levied on the brasileiros[13] who were also charged for the use of the Indian manpower. In 1549 the administration of the colony was centralized in Salvador[14], a city which was to remain the capital of the colony for more than two centuries[15]. A permanent agency for the taxation was finally settled. It was named provedoria.  A geographical expansion led by the bandeirantes in the seventeenth century is due to the slave hunting of Indians, for the purpose of discovering gold and silver mines and to a certain expansionist impetus[16]. The Portuguese conquered the hinterlands, the sad tropics[17].  Up to the year of 1808, when the Portuguese royal family came to Brazil[18], taxes were levied on the production of Brazilian goods. Sugar cane in the Northeast (modern states of Pernambuco and Bahia) and gold in the hinterlands of modern state of Minas Gerais were strongly taxed by the Portuguese. In the areas where gold was found the Portuguese took away as much as they could. A rebellion challenged the crown in the year of 1789. The leader was a jack of all trades nick-named Tiradentes[19]. There are suspicions that another leader of the upheaval, Jose Joaquim de Maia, had visited Thomas Jefferson in France, asking for American help[20]. In that sense, the recurrent American idea that taxation without representation is tyranny had its moment in Brazil, although with a totally different aftermath, for the rebellion was crushed. The subsequent execution of the Brazilian popular leader created a martyr for the later movement of independence[21]. The presence of the Portuguese royal family in Brazil after 1808 altered the panorama. Apparently the mercantilist policy was to be abandoned, for the ports were opened to world trade[22] and to the ships of all nations, thus ending three centuries of Portuguese monopoly[23]. The British were protected with lower brackets, a circumstance that delayed the development of Brazilian industry for a century or so. Goods could be cheaper if imported from abroad. This predominant lack of vision can be responsible for the country’s supposed agrarian vocation. 

In 1822 Brazil achieved its political freedom from Portugal notwithstanding its economic dependence upon England. A Ministry of Finance was created in 1824, the same year Brazil had its first constitution. In spite of many shortcomings the new-born nation maintained order and strengthened unity[24]. Brazil had acquired responsibility for its own destiny within a set of liberal values[25]. The constitution of 1824 granted much of the power to central government, ascribing very little to the provinces. There was a constitutional emphasis on strong central government that underlined the difficulty in practice of imposing central control[26]. In the United States many states created a central power, as opposed to Brazil, where a central power created many states. This political framework has had a strong impact on the tax system. Until today there is a huge concentration of the power to tax in the hands of the central government.  In 1834 the constitution was amended and the power of the provinces was increased[27]. In 1840 a coup d’état resulted in the long reign of Dom Pedro II. He guaranteed the supremacy of the central power again. In 1889 the empire was changed to republic but it did not have a radical effect on society[28]. If for more than one hundred years sugar ruled Brazil[29], at the outset of the twentieth century coffee was the king. The constitution of 1891 granted to the states the power to levy taxes on exports, which guaranteed the supremacy of the states where coffee was produced. It explains how Sao Paulo was to become the backbone of the Brazilian economy, a position sustained up to today. During World War I, the state of Sao Paulo went through an economic boom, thanks to the development of industrial activity whereupon the state took the lead in manufacturing and processing[30].  In 1930 another coup d’état brought to office Getulio Vargas, who from 1937 onwards implemented a dictatorial regime. He canceled the presidential election scheduled for 1938 and benefited from wartime emergency, postponing the resumption of electoral politics[31]. Getulio Vargas is a riddle. According to an American scholar, from the University of Miami:

Who was Getulio Vargas ? What are the motives of the man Franklin D. Roosevelt, in a speech in Rio de Janeiro in 1936, credited with being ‘one of the two people who invented the New Deal’? Why was Vargas despised by some as ‘Machiavellian’? What did President Fernando Henrique Cardoso – a distinguished and knowledgeable social scientist – mean when he declared at the outset of his term in 1994 that his administration would bring about ‘the end of Vargas era’?[32]

The centralization of power was increased. A constitution imposed by Vargas in 1937 favored the regime. But it did not resist the aftermath of World War II[33]. In 1946 liberal ideas were fixed in the new constitution. The fall of Vargas in 1945 initiated a period of democratic experiments in Brazil[34].The municipalities finally were recognized as political entities and as a result Brazilian cities could levy taxes on urban property, a tradition that dated back the colonial period. In 1964 the military took power[35] and after 1968 the regime was brutally repressive[36]. According to Professor Jordan Young, in 1967, the civilian opposition is fragmented and demoralized[37]. The dictatorship lasted to 1984. Only two political parties were allowed to act[38]. The American foreign policy sustained the dictatorial regime[39]. According to Thomas Skidmore there was a political purge right after the coup of 1964[40].

During the military dictatorship the government passed a tax reform in 1965. According to Flávio Bauer Novelli[41], a Brazilian scholar, the highlights of the 1965 reform were: greater functionality, rationality and rigidity in the differentiation of revenues; appropriate centralization of the system; determination of taxing jurisdiction, viz., the original taxing power; application of the value-added technique to calculation of taxes on the circulation of goods and the institution of a true system of revenue sharing among the entities of the federation. The aforementioned tax reform is embodied in the Brazilian National Tax Code, CTN, as it is known[42]. The CTN has the theoretical categories within which the Brazilian tax law works and a short explanation of those categories will soon be presented in this paper.

In 1985 the civilians came back to power. National elections were held in the Congress which elected Tancredo Neves president. He died shortly before taking office and was replaced by Jose Sarney who was followed by Collor de Mello, a populist politician from the state of Alagoas. To avoid impeachment, de Mello resigned. His period is related to charges of corruption. He was followed by Fernando Henrique Cardoso, who in two terms controlled the Brazilian public enemy number one: the inflation. Cardoso kept democracy and guaranteed a transition to Lula, a former union activist, now president of the country.

The Constitution of 1988 frames the country’s political institutions, and its rules are the main source for the Brazilian tax law system, as well as the mentioned afore CTN.

2. Sources of Taxation in Brazil

The CTN, law 5.172/66, defines internal revenues. Article 3o. of CTN says that internal revenue is every mandatory pecuniary obligation , in money or whatever its value expresses, which is not a penalty for an illicit act, set forth by law and assessed by administrative activity according to the law[43]. For the CTN internal revenues are divided in taxes, fees and benefit charges, this last one a special assessment for public works[44]. Later on, in 1988, the constitution added two other kinds of internal revenues, namely social contributions and mandatory loans[45] and, accordingly, the Brazilian tax law system has five patterns of internal revenues.

The power that a public entity has to levy taxes can not be transferred to another public entity[46]. It means, for instance, that if a certain municipality does not levy taxes on urban buildings, which is within its power, the central government and the states can not levy the aforesaid tax[47]. Some municipalities do not levy taxes on urban buildings in order to attract investors and business.

The most common kind of internal revenue that Brazilian fiscal law has is simply what one translates as tax. CTN in its article 16 defines taxes as follows: Tax is the internal revenue whose obligation has as a taxable event any situation regardless of any specific state activity related to the tax payer[48]. According to this statutory rule, the state has no obligation to spend the money it collects as taxes with the taxable event related to the collection. The money one pays because he or she owns an automotive vehicle does not necessarily have to be spent on the betterment of streets or roads. The rule removes public control from public expending. CTN divides the taxes into three major groups: on international commerce[49], on assets and income[50] and on the production and circulation of goods[51]. In the remarks about the Brazilian constitution these categories will be further explained.

Fees can be levied by the central government, by the states and by the municipalities as a result of their policy power and as a result of some public service that they offer to the tax payer[52]. According to the Brazilian Constitution, fees can be levied by virtue of police power or for the effective or potential use of specific and divisible public services, rendered to the taxpayer or made available to him. There are fees for the use of airports, bus stations, train stations, telephones, power and electricity, as well as for licenses and several other documents prepared by public agents. One has to pay a federal fee to get a passport.

Benefit charges or special assessments for public works can be levied by the central government, by the states and by the municipalities when public works increase the value of the real estate of the taxpayer[53]. Usually this internal revenue is levied on the paving of roads, construction of bridges and several other public works that make the taxpayer’s real estate more valuable. Bilac Pinto, a Brazilian scholar and politician from the 30’s, defended this internal revenue primarily in his own state, Minas Gerais. He learned about it in the United States, for the pattern of taxation would have been used by Franklin Delano Roosevelt during the years of the New Deal.  

CTN also has a set of rules for its own interpretation[54]. The so-called literary interpretation is the main tool in the understanding and in the application of the code. Absence of express disposition authorizes the interpreter to use analogy, the general principles of tax law, the general principles of public law and equity. For the Brazilian law system the analogy is somewhat close to the American rationale on case law, where similar cases might have similar solutions.

The principles of tax law for purposes of the interpretation of the rules of the statute are:

1) principle of lawfulness, that is, only the law can impose taxes; the law in here has to be understood in its narrow sense.

2) principle of equality in the treatment of the tax payer;

3) principle of the prohibition of the enforcement of  an ex post facto law, which means that the government can not collect internal revenues for taxable events that occurred before the law which instituted or increased said internal revenue came into force, or that the government can not collect  in the same fiscal year in which the law instituting or increasing such tax was published ;

4) principle that forbids the use of a internal revenue for the purpose of confiscation;

5) principle that forbids the government to establish limitations on the circulation of person or goods, by means of interstate or intermunicipal  internal revenues, except for the collection of toll fees for the use of highways maintained by the government; and,

6) principle that forbids the political entities to institute taxes on the property, income or services of one another, of places of religious worship of any domination and on the property, income or services of political parties, including their foundations, of worker unions, of non-profit education and social assistance institutions and last, but not the least, on books, newspapers, periodicals and the paper intended for the printing thereof[55].

As for the general principles of public law the idea of the supremacy of the public interest vis-à-vis the private ones is the main example. Equity does not have in Brazilian law the same connotation it has in England or in the United States. Equity in Brazilian law is a mere reference to equality, whereby in tax law the tax payer in equal condition to the other has to have an equal treatment. Therefore equity and equality do have the same practical consequences in the interpretation of tax law, as long as Brazilian tax law is at stake.

The taxpayer has the obligation to pay taxes and the CTN named it the principal obligation. This is an obligation of giving. The taxpayer has the duty to carry money to the state. The ancient Roman Law typified this duty as an obligatio dare ( duty to give). The taxpayer also has the duty to maintain records, to prepare and forward returns, to disclose information. Those duties are in the old Roman categories obligations of facere ( to do ) or non facere ( not to do ) . The CTN named those duties as accessory obligations[56]. 

Another core concept in the Brazilian tax law is the definition of taxable event. According to the CTN, a taxable event of a principal obligation is a situation defined in law as necessary and enough to be taxable[57]. The taxable event of the income tax is the realization of income. The taxable event of the land tax is the property of rural real estate. The taxable event of the import tax is the importation of goods. The taxable event of the export tax is the exportation of goods. And so on.

The active person or the active subject in the tax relation, according to Brazilian law, is the judicial person of public law who has the power to levy taxes[58] under the terms of the constitution. The Union, or the central federal government, can levy the following taxes[59]:

I)             importation of foreign products;

II)           exportation to other countries of national or nationalized products;

III)        income and earnings of any nature;

IV)         manufactured products;

V)          credit, foreign exchange and insurance transactions, or transactions relating to bonds or securities;

VI)        rural property;

VII)     large fortunes, under the terms of supplementary law[60];

The Constitution also allows the Union to institute, by means of supplementary law, taxes not instituted originally in the constitutional provisions, provided that they are non-cumulative and not founded on a taxable event or an assessment basis reserved for the taxes specified in the afore mentioned constitution[61]. The Union can levy extraordinary taxes in the imminence or in the event of foreign war, encompassed or not by its original power to tax, which shall be gradually suppressed when the causes for their institution have ceased[62]. The Union can also levy social contributions, fees and mandatory loans. Compulsory loans can be instituted by the Union in order to meet extraordinary expenses resulting from public calamity, foreign war or the imminence thereof[63].

The states and the federal district of Brasilia are empowered to levy taxes on[64] :

I)       transfer by death and donation of any property or rights;

II)     transactions relating to the circulation of goods and to the rendering of interstate and intermunicipal transportation services and services of communication, even when such transactions and renderings begin abroad;

III)  ownership of automotive vehicles. 

The municipalities have the competence to levy taxes on:

I)       urban buildings and urban land property;

II)     inter vivos transfer, on any account , by onerous acts, of real property, by nature or physical accession, and of real rights to property, except for real security, as well as the assignment of rights to the purchase thereof;

III)  services of any nature, not included in the list of services whose competence to levy taxes belong to the states.

The passive person or the passive subject is the one who has the duty to pay taxes[65]. He or she is the taxpayer if his or her relation to the duty is personal[66] or he or she is the tax bearer if his or her duty is set forth by law[67]. For the establishment of the place of the household the CTN provides that the taxpayer is free to indicate it in his or her returns[68], a similar rule found in the American income tax provisions[69].

The tax relation between the taxpayer and the government sets for the latter a credit and for the former a debt. The tax credit is born with the principal obligation[70] and subsequent assessment. The assessment verifies the occurrence of the taxable event, determines the substance taxable, calculates the amount due, identifies the taxpayer and sets forth penalties[71]. There is a self-assessment when the taxpayer provides the information for the public agents, such as happens with the income tax. There is an ex-officio assessment, when the public agents indicate the amount due, as happens with the taxes on urban buildings and land property[72].

The credit is under suspension[73] and therefore can not be finally assessed when there is an installment agreement, when the taxpayer deposits the assessed amount in order to discuss the debt[74], when the taxpayer still has administrative appeals to be decided and when a taxpayer has in his or her favor an order of the Court. The credit is extinguished [75] when the taxpayer pays his or her duties to the government; where there is compensation, i.e., when the taxpayer has refunds to make up for his or her debts; when the government waives the taxpayer; when the statute of limitations[76] forbids the public agent to implement the assessment; when the money deposited in a bank by the taxpayer to discuss the assessment is forwarded to the government and when there is a final order of the Court nullifying the assessment. The credit is excluded [77]when there is a waiver to the taxpayer or when there is a fiscal amnesty.

The constitution contains the authorization for the creation of taxes. The Union, the states and the municipalities can levy taxes according to the constitution. Sometimes, in spite of this mentioned authorization, there is no political aim in the implementation of some taxes. This is the case of the federal tax on large fortunes. This tax has a constitutional framework, but so far it has not been levied on taxpayers whose fortunes could justify the imposition.

3. Federal Taxes

The income tax[78] is levied by the federal government upon income and earnings of any nature[79].  This tax shall be based on the criteria of generality, universality and progressiveness[80]. It means that everyone has to pay in relation to everything and the more income one makes, the more income tax one pays. This tax is levied on income and capital gains earned from domestic or foreign sources by taxpayers residing in Brazil. Corporations also pay income taxes on profits they make through operations carried out within Brazil or overseas.

The personal income tax is due by the taxpayer who makes income. It actually is the amount of gross income minus the itemized deductions, such as medical and dental expenses, alimony and expenses for education[81]. The brackets vary from 15% to 27.5% depending upon the level of income. The taxpayer can pay the amount due in up to six installments. Returns are supposed to be forwarded to federal agencies every year, until the end of April.

The corporation income tax is based upon three conditions: i. net profits as actually obtained by the corporation; ii. percentage of gross revenues from the main business plus capital gains as determined on a quarterly basis ( this pattern can be elected by the corporation) and iii. percentage of gross revenues arising from the main business plus the overall capital gains, determined on a monthly and estimated basis, which is due as advance of the total amount to be paid, levied on profits as determined in the yearly balance sheets. Generally speaking, rates and brackets are around 15% of the corporation’s gross income. This amount can have a surcharge of a further 10%. Taxation of profits earned abroad by Brazilian companies is withheld on rates that vary from 15% to 25%, related to services in general and compensation for labor, royalties, technical, scientific or administrative services, airplane leases, container rentals and shipping activities, among others[82]. Salaries, compensation for services, interest are withheld on brackets that vary from 15% to 27.5%.

The land tax[83] or the tax on rural property is assessed on the property of rural land[84]. This tax shall have its rates determined in such a manner as to discourage the retention of unproductive real property and shall not be levied on small tracts of land, when an owner who has no other rural property explores them by himself or herself or with his or her family[85]. The land tax can illustrate the effects of taxation on the overall organization of the economy. In order to avoid the concentration of rural property in the hands of a minority, there is a tendency towards the utilization of bigger rates and brackets on great tracts of land. The federal government has to assign to the municipalities fifty percent of the proceeds from the collection of the federal tax on rural property, concerning rural property located in the municipalities[86].

The import tax[87] is levied on the importation of foreign products[88]. Historically it has been used by the government to regulate foreign trade and to help the national industry. Thanks to some taxation on foreign goods, among other factors, Brazil went through a process of industrialization in the 50’s. Aside from that, then President Juscelino Kubischek made a direct appeal to private investors, both domestic and foreign[89]. The country has an important automotive industry and its growth is related to the widespread utilization of high rates on the import tax. The brackets vary according to the product imported. Because the government uses the import tax to stimulate the growth of industry, the rates are under constant change. It is worth saying that the import tax is not submitted to the principle of the ex post facto law and therefore the brackets are managed by presidential decree[90], without submission to the Congress for approval, within the same year of its change.

The export tax[91] is levied on the exportation to other countries of national or nationalized products[92]. Its rates can be altered by the federal government on the same conditions applied to the import tax[93].  Along with the rates for the American dollars, the export tax is of paramount substance and weight for the Brazilian economy. Not in a sense that it represents a significant source of money for the budget, but in a way it indicates some incentives for Brazilian business.

The tax on manufactured products[94], a sort of federal VAT[95] on industrial products, is levied on the exit of a manufactured product from the premises of a company, as well as being levied on the importation of a manufactured product. Its rates are selective, based on the essentiality of the product[96]. It explains why the rates on cigarettes are much higher than the rates on milk, to give a simple example. This tax shall be non-cumulative, and the tax due in each transaction shall be compensated by the amount charged in previous transactions[97]. In order to encourage exportation, the tax on manufactured products shall not be levied on products intended to export[98].

The tax on financial transactions[99] is levied on credit, foreign exchange and insurance transactions, or transactions relating to bonds or securities[100]. As a rule the assessment is made in the case of credit transactions made by financial institutions, or in the event of exchange transactions made by institutions authorized to deal in the exchange market, or on insurance transactions made by insurance companies, or on transactions relating to securities in general and on credit assignments made by legal entities to factoring companies. Gold, when defined in law as a financial asset or an exchange instrument, is subject exclusively to the tax on financial transactions, due on the original transaction[101]; the minimum rate shall be one percent, and the transferences of the amount collected is ensured, according to the Brazilian constitution as follows: thirty percent to the state, the federal district or the territory, depending on the origin[102] and seventy per cent to the municipality of the origin[103].  The tax on financial transactions is controlled by the government, which do not need congressional approval to reduce or increase its rates, even within the same fiscal year.

The tax on large fortunes[104] albeit authorized by the constitution[105] has not been created so far, for it needs supplementary law to define its terms. The definition of large fortunes has been somewhat troublesome and after fifteen years of the existence of its new constitution, Brazil has not managed to levy taxes on large fortunes, as originally conceived.

There are also several federal contributions. Such is the case of the provisory contribution on financial movements[106], to be added on any financial movement made through banks at rates of 0.2%. The results of this contribution are to establish a fund to fight and eradicate poverty, as set forth by constitutional amendment number 31, from the year 2000.  The contribution for the social integration program[107] is levied on the gross revenues of corporations at a monthly rate of 0.65%[108]. The social contribution on revenues[109] is levied on the gross revenue from the rendering of services or the selling of products. Its goal is to provide funds for the social welfare[110]. The social contribution on corporate profits[111] is levied on the net profits of corporations, with rates around 8%, except for banks, whose rates are nearly 18%. There is another federal contribution administered by the National Social Security Institute[112], which is the social contribution applicable to the payroll.  This contribution is due to the general welfare system.  

4. State Taxes

The states and the federal district have the competence and power to levy taxes on transfer by death and donation of any property or rights[113] , according to the constitution[114] . It is important to consider the constitution in order to quote that regarding real property and the respective rights, the levy is within the competence of the state where the property is located, or the federal district, this being the case[115] . Regarding bonds, titles and credits, the levy is within the competence of the state or the federal district where the probate or enrollment is processed, or where the donor maintains his or her household[116].

The states and the federal district also have the competence and power to levy taxes on sales and services[117]. This tax comprehends levies on transactions relating to the circulation of goods and to the rendering of interstate and intermunicipal transportation services and services of communication, even when such transactions and renderings begin abroad[118]. This tax shall be non-cumulative, and the tax due in each transaction concerning circulation of goods or rendering of services shall be compensated by the amount charged in the previous transactions by the same or by another state or by federal district[119]. As the federal VAT, this tax may be selective, based on the essentiality of the goods or services[120] . This tax shall not be levied on transactions transferring industrialized products abroad, excluding semi-finished products as defined in supplementary law[121]. The tax on sales and services is the main source of the state revenues. As a matter of fiscal policy, some goods are tax-exempt or submitted to reduced rates. This tax is levied on import transactions when the value due is the amount of the goods plus the import tax as well as the tax on the industrialized products.

The states and the federal district have the competence and power to levy taxes on the ownership of automotive vehicles[122]. To the municipalities are ascribed fifty percent of the proceeds from the collection of the said tax[123]. State law has the competence to determine what is taxable, therefore cars, ships, trucks and airplanes can have different treatment from state to state. There are some exemptions for handicapped owners, especially when one has special cars, made to order.

5. Municipalities Taxes

The municipalities can levy taxes on urban buildings and urban land property[124]. This tax can be progressive according to the value of property[125] and it can have different rates according to the location and utilization of property[126]. The municipalities can alter brackets, which is frequently done, with the sole purpose of forcing the social use of property.

The municipalities can levy taxes on the transference of real property[127], that is, inter vivos transfer, on any account, by onerous acts, of real property, by nature or physical accession, and of real rights to property, except real security, as well as the assignment of rights to the purchase thereof[128]. This tax is within the competence of the municipality where the property is located[129]. Still according to the Brazilian constitution, this tax shall not be levied on the transfer of goods or rights incorporated into the assets of a corporate body to improve the capital, nor on the transfer of goods or rights resulting from the merger, incorporation, division or dissolution of corporate bodies, unless, in such cases, the predominant activity of the purchaser is the purchase and sale of such goods or rights, the lease of real property or leasing[130] . The tax on transference of real property sustains the existence of a great web of notaries and a huge bureaucracy is maintained in order to keep records and prepare affidavits.

Finally, the municipalities can levy taxes on services of any nature[131]. This tax is levied on the rendering of services performed by individuals, self-employed, professionals in general, corporations, according to a list provided by the law. The price of the rendered service is the basis for the levy.

6. Federal Tax Administration 

The Federal Tax Administration is centralized in the Ministry of Finance[132]. The Ministry of Finance is appointed by the President[133], to whom he or she reports. The appointment of the Ministry by the President does not need a hearing by the Senate. Under the authority of the Ministry of Finance, there is the Secretariat of Federal Revenues[134]. The Secretariat was established in 1968, as a central unit, in Brasilia, the federal capital. The Secretariat replaced the old pattern of threefold division, whereby the federal revenue was split into internal income, customs duties and income tax. Since 1968 there has been a centralized model that has the aim of improving the collection of taxes as well as simplifying the bureaucracy to the taxpayer.

The Secretariat of Federal Revenues is administrated by ten fiscal regions, geographically divided. There are accordingly ten regional bureaus of federal revenues. Those bureaus have the duty of coordination of the decentralized units[135] . Circa one hundred federal revenue units are responsible for more than three hundred and eight federal revenue agencies. Usually it is the size of the municipality, its revenue and regional weight that will justify the creation of a decentralized federal unit. The Brazilian customs have a very important role in this structure, especially on the so-called primary zones, as ports, airports and borders areas.

The agents are recruited by public competition, conducted by the School of Finance and Administration[136]. In Brazil, public offices, positions and functions are accessible to all citizens who meet the requirements established by law, as well as to foreigners, under the terms of Brazilian laws[137] . It is written in the Constitution that investiture in a public office or position depends on previously passing an entrance examination consisting of tests or tests and presentation of academic and professional credentials, according to the nature and the complexity of the office or position, as provided by law, except for appointment to a commission office declared by law as being of free appointment and discharge[138] . The public entrance examinations are disputed and its period of validity shall be up to two years, extended once for a like period of time[139] . Public servants who are appointed to effective posts by means of public examination acquire tenure after three years of actual service[140].

A typical federal revenue unit has a deputy supervisor[141] . He or she is appointed by the regional deputy supervisor[142], who is appointed by the Secretary. The deputy supervisor is a public officer with experience in auditing and collection. Under the authority of a local deputy supervisor there are many agents, public officers[143] with the primary function of auditing, summoning and meeting with taxpayers. Those agents are in general well prepared and college education is a requisite for the application to said effective post. In addition to superior level officials, there are also technical level and support agents.

There are some appeals offices, divided in eighteen courts where the first trial of objection proceedings can be filed by taxpayers. However, because the judicial courts can be the venue for tax discussions at any time[144], there is a tendency to relegate the appeals office to an instance of gaining time. The permanent use of the judicial power represents a heavy workload to the Attorney’s General Office of National Finance[145], who represents the federal government in the judicial execution of receivable taxes of an internal revenue nature[146].

The Attorney’s General Office of National Finance has a central unity in Brasilia, regional offices in all the states and local offices over the country, where there are federal courts. This office represents the federal government in tax cases, as well as a plaintiff and as a defendant. As a plaintiff it performs judicial tax collection[147]. The Brazilian tax system does not acknowledge the administrative collection of taxes. As a defendant the office represents the Brazilian federal government in tax cases in many venues, from the district courts to the Supreme Court. The access to the Supreme Court is somehow much easier than in the United States. There is no writ of certiorari and the prerequisite is the discussion on the constitutional matters. Because the payment is not a requisite for filing suit, the amount of tax cases is astonishing. Aside from regular civil actions, there is a great deal of writ of mandamus, as prescribed by the Constitution[148].

Criminal tax offenses are subordinate to the authority of the federal public prosecutors, under the counsel of the Attorney-General of the Republic. He or she is appointed by the President from among career members over thirty-five years of age, after his or her name has been approved by the absolute majority of the members of the federal Senate, for a term of office of two years, reappointment being allowed[149].

The taxpayer needs a lawyer to act in court[150], both in civil and in criminal cases. Due to economic and political conditions of the country, however, where poverty and corruption are aspects that shed light on the tax system, much energy is lost in bureaucratic procedures of low results, whereas loopholes are permanent shelter to taxpayers of doubtable credibility.     

7. Conclusions

From what has been written so far the following conclusions can be drawn:

1. The Brazilian Constitution authorizes the Union, the states, the federal district and the municipalities to levy taxes on taxable events described in said constitution;

2. There are many internal revenues in Brazil, such as taxes, fees, benefit charges, special contributions and mandatory loans; they are all featured in the Constitution;

3. The Brazilian tax law works within several principles, as the principles of lawfulness, of equality in the treatment of the tax payer, the prohibition of the enforcement of an ex post facto law, among others;

4. The Union levies taxes on importation, exportation, property of land, income, industrialized products, financial transactions;

5. The states and the federal districts levy taxes on transfer by death, donations, circulation of goods and services, ownership of automotive vehicles;

6. The municipalities levy taxes on urban buildings, transfer of property and services of any nature;

7. There is a social contribution applicable to the payroll due to the National Security Institute;

8. The Ministry of Finance centralizes the federal tax administration under the command of the Secretariat of Federal Revenues, whose central unit is located in Brasilia;

9. There are over one hundred decentralized units throughout the country;

10. The federal agents are recruited by public competition; the agents gain tenure after three years of service;

11. The Attorney’s General Office of National Finance represents the Brazilian revenue service in courts;

12. There is no voluntary compliance; the obligation to pay taxes depends upon the principle of lawfulness; one pays because the law says so; one can contest the law;

13. Criminal tax offenses are under the responsibility of the Attorney General of the Republic;

14. The tax payer can not act by him or herself in Court, he or she needs a lawyer;

15.  Due to a huge bureaucracy and to a heavy workload, the federal agents are meek in front of some powerful taxpayers.   


[1]     Ronald M. Schneider, Order and Progress- a Political History of Brazil, page 6.

[2]     Jordan Young wrote a classic : The Brazilian Revolution of 1930 and the Aftermath.  Professor Young lived in Brazil in the 30’s and later on taught Brazilian Civilization at Pace University in New York City for a number of years. He currently lives in Princeton, New Jersey.

[3]     Thomas Skidmore is known for his illuminating Brazil- Five Centuries of Change. He opens this book stating that beneath a facade of harmony there is in Brazil a contradictory society. He certainly understood the country he studied.   

[4]     Catherine Tinker trained judges from the State of Rondonia on environmental issues. She  was also among the organizers of Eco-92 , a conference on sustainable development held in Brazil. Presently she teaches postgraduate courses on the University of Rio Grande do Sul, in Porto Alegre in the southernmost Brazilian state of Rio Grande do Sul.

[5]     This is the case of A Panorama of Brazilian Law,  edited by Jacob Dolinger from the University of Rio de Janeiro and Keith S. Rosenn from the University of Miami. The book was published in 1992 and cover topics as tax law, moral damages, environmental protection, civil procedure, labor law, among others.

[6]     Scott Turow in One L, page 41 reminds us that in many ways a legal education was just a learning of a second language. If legalese itself is a language within a language, the effort to render legalese into a thirty language is even more complicated.

[7]     Boaventura de Sousa Santos, Toward a New Commnonse, page 340.

[8]     Because one uses History and past to justify politics and present. Walter Benjamin, Theses on History, These number XIV.

[9]     Oliver Wendell Holmes, Jr., The Common Law, in Willliam W. Fisher III (ed.), American Legal Realism, page 9.

[10]    The Municipalities is a translation for Municípios but it is more similar to the American counties.

[11]    There is a tendency nowadays to recognize the Portuguese spoken in Brazil as Brazilian. But a Brazilian fellow is easily understood in Portugal and vice versa. The Brazilian Constitution in its article 13 prescribes that Portuguese is the official language for the Federative Republic of Brazil. Several indigenous peoples still maintain their original tongues but there is a tendency for the sole use of Portuguese.  

[12]    Brazil is named after a tree that has some material used to make a red ink that resembles red hot. This material is in a curved nut that has a hard shell with three sides. The tree is hardly found in the country nowadays.

[13]    Brasileiros or Brazilians, where the ones who made the commerce of the Brazilian wood.

[14]    Salvador was the first Brazilian capital. In 1808 it looses the privilege to Rio de Janeiro. Since 1960 Brasilia, a planned city, has been the capital of the country.

[15]    Thomas Skidmore, Brazil- five centuries of change, page 10.

[16] Myriam Ellis, The Bandeiras in the Geographical Expansion of Brazil. In Richard M. Morse (ed.), The Bandeirantes, the Historical Rule of the Brazilian Pathfinders, page 48.

[17]    Sad Tropics is the English tradition for Tristes Tropiques, a landmark book written by French scholar and anthropologist Claude Levi-Strauss, describing, among other places, the hinterlands of Brazil.

[18]    The Portuguese royal family escaped from the Napoleonic invasion in the context of the war between France and England. An alliance between Portugal and England was confirmed and the influence of England on Brazil will be heavily felt until World War II.

[19]    Thomas Skidmore, Brazil- five centuries of change, page 33. Tiradentes would be translated into tooth-puller and the nickname identifies one of the activities of the Brazilian hero.

[20]    Thomas Skidmore, Brazil- five centuries of change, page 32.

[21]    E. Bradford Burns, History of Brazil, page 79.

[22]    E. Bradford Burns, A History of Brazil, page 112.

[23]    Thomas Skidmore, Brazil- five centuries of change, page 36.

[24]    E. Bradford Burns, A History of Brazil, page 134.

[25]    Manuel Cardoso, The Transition, 1808-1840, in Lawerence F. Hill (ed.), Brazil, page 15.

[26]    Peter Flynn, Brazil : a Political Analysis, page 11.

[27]    Thomas Skidmore, Brazil-five centuries of change, page 44.

[28]    Peter Flynn, Brazil : a Political Analysis, page 28.

[29]    Stuart B. Sshwartz, Free Labor in a Slave Economy : The Lavradores de Cana of Colonial Bahia, in Dauril Alden (ed.),  Colonial Roots of Modern Brazil, page 147.

[30]    Frederic William Ganzert, Industry, Commerce and Finance, in Lawrence F. Hill (ed.), Brazil, page 257. 

[31]    Thomas Skidmore, Brazil-five centuries of change, page 124.

[32]    Robert M. Levine, Father of the Poor ? Vargas and his Era, page 12.

[33]    According to Thomas Skidmore, Vargas was farsighted  enough to realize that his dictatorship could not survive the war. Thomas Skidmore, Politics in Brazil, 1930-1964, page 39.

[34]    E. Bradford Burns, A History of Brazil, page 381.

[35]    Georges-André Fiechter, Brazil Since 1964 : Modernization under a Military Regime. The book deals with the military phenomenon in Brazil and its rapports to political, sociological  and economic development.   

[36]    Thomas Skidmore, Brazil- five centuries of change, page 159.

[37]    Jordan M. Young, The Brazilian Revolution of 1930 and the Aftermath, page 118.

[38]    Ollie Andrew Johnson, III, analyses the Brazilian party system after 1964 in his Brazilian Party Politics and the Coup of 1964.

[39]    Interesting to consult Phyllis R. Parker, Brazil and the Quiet Intervention,1964.

[40]    Thomas Skidmore, The Politics of Military Rule in Brazil, 1964-85, page 27.

[41]    Flávio Bauer Novelli, Notes on the Brazilian Tax System, in Jacob Dolinger and Keith S. Rosenn (ed.), A Panorama of Brazilian Law, page 57. Translation into English by Michael R. Royster.

[42]    CTN stands for Código Tributário Nacional, National Tributary Code. Henceforward the paper will refer to the code as CTN.

[43]    CTN, article 3o.. Translate and adapted from the Portuguese by the author. Tributo é toda prestação pecuniária compulsória, em moeda ou valor que nela se possa exprimir, que não constitua sanção de ato ilícito, instituída em lei e cobrada mediante atividade administrativa plenamente vinculada.

[44]    Taxes are the best translation for impostos. Fees are the best translation for taxas. The reader has to be aware of the fact that apparently taxes and taxas have a similar sound and meaning. But what the Brazilian tax law conceives as taxas  are exactly what the American tax law has as fees.

[45]    In Portuguese contribuições sociais e empréstimos compulsórios.

[46]    CTN, article 7o.

[47]    CTN, article 8o.

[48]    Brazilian Constitution, article 145, I. CTN, article 16. Translated and adapted from the Portuguese by the author. Imposto é o tributo cuja obrigação tem por fato gerador uma situação independente de qualquer atividade estatal específica, relativa ao contribuinte.

[49]    CTN, articles 19 and 23.

[50]    CTN, articles 29, 32, 35 and 43.

[51]    CTN, articles 46, 52, 63 and 71.

[52]    Brazilian Constitution, article 145, II. CTN, article 77.

[53]    Brazilian Constitution, article 145, III. CTN, article 81.

[54]    CTN, article 108.

[55]    Brazilian Constitution, article 150. The papers works with the English version of the Brazilian constitution, rendered from the Portuguese by Istvan Vajda, Patrícia de Queiroz Carvalho Zimbres and Vanira Tavares de Souza.

[56]    CTN, article 113.

[57]    CTN, article 114. Translation and adaptation to English by the author. Fato gerador da obrigação principal é a situação necessária e suficiente para sua ocorrência.

[58]    CTN, article 119.

[59]    Brazilian Constitution, article 153.

[60]    Supplementary laws shall be approved by absolute majority according to the article 69 of the Brazilian constitution. Its quorum demands lots of political articulation as well as a heavy implement of lobbying.

[61]    Brazilian Constitution, article 154, I.

[62]    Brazilian Constitution, article 154, II.

[63]    Brazilian Constitution, article 148.

[64]    Brazilian Constitution, article 155.

[65]    CTN, article 121.

[66]    CTN, article 121, I.

[67]    CTN, article 122, II.

[68]    CTN, article 127.

[69]    USA Internal Revenue Code , Sec. 6151.

[70]    CTN, article 139.

[71]    CTN, article 142.

[72]    CTN, article 147.

[73]    CTN, article 151.

[74]    As oppose to what happens in the United States, where the tax payer has to pay the debt to discuss the assessment of income tax in the Federal District Courts or in the US Courts of Federal Claims, in the Brazilian tax procedure there is no necessity to pay the debt before filling suit. In that sense, there are similarities between the Brazilian tax procedure and the Tax Court rules in the US. 

[75]    CTN, article 156.

[76]    As a rule the government has five years to implement the assessment, counted to the moment of the taxable even t. After that, as rule, the government has another five years to fill suit on the courts to to collect the taxes.

[77]    CTN, article 175.

[78]    In Portuguese, IR, Imposto de Renda.

[79]    Brazilian Constitution, article 153, III.

[80]    Brazilian Constitution, article 153, Paragraph 2, I.

[81]    Formal education. It means expenses with elementary school, high school, college, undergraduate, graduate, certificates, diplomas, degrees. It does include language or computer training.

[82]    Peter Lugthart and Cristina Arantes A. Berry, Brazil Addresses Taxation of Foreign Income, Withholding Rates, in Tax Notes International, volume 28, Number 7, page 655.

[83]    In Portuguese, ITR,  Imposto Territorial Rural.

[84]    Brazilian Constitution, article 153, VI.

[85]    Brazilian Constitution, article 153, Paragraph 4.

[86]    Brazilian Constitution, article 158, II.

[87]    In Portuguese, II, Imposto de Importação.

[88]    Brazilian Constitution, article 153, I.

[89]    Thomas Skidmore, Politics in Brazil, 1930-1964, page 165.

[90]    Brazilian Constitution, article 153, paragraph 1.

[91]    In Portuguese, IE, Imposto de Exportação.

[92]    Brazilian Constitution, article 153, II.

[93]    Brazilian Constitution, article 153, paragraph 1.

[94]    In Portuguese, IPI, Imposto de Produtos Industrializados.

[95]    VAT is the European Value-Added Tax.

[96]    Brazilian Constitution, article 153, paragraph 3, I.

[97]    Brazilian Constitution, article 153, paragraph 3, II.

[98]    Brazilian Constitution, article 153, paragraph 3, III.

[99]    In Portuguese, IOF, Imposto sobre Operações Financeiras.

[100] Brazilian Constitution, article 153, V.

[101] Brazilian Constitution, article 153, paragraph 5.

[102] Brazilian Constitution, article 153, paragraph 5, I.

[103] Brazilian Constitution, article 153, paragraph 5, II.

[104] In Portuguese, IGF, Imposto sobre Grandes Fortunas.

[105] Brazilian Constitution, article 153, VI.

[106] In Portuguese, CPMF, Contribuição Provisória sobre Movimentação Financeira.

[107] In Portuguese, PIS, Programa de Integração Social.

[108] The general concepts of this contribution are on the Brazilian Constitution, article 195.

[109] In Portuguese, COFINS, Contribuição para Financiamento da Seguridade Social.

[110] Brazilian Constitution, article 195.

[111] In Portuguese, CSLL, Contribuição sobre o Lucro Líquido.

[112] In Portuguese, INSS, Instituto Nacional do Seguro Social.

[113] In Portuguese, ITCMD, Imposto de Transmissão Causa Mortis e Doação.

[114] Brazilian Constitution, article 155, I.

[115] Brazilian Constitution, article 155, paragraph 1, I.

[116] Brazilian Constitution, article 155, paragraph 1, II.

[117] In Portuguese, ICMS, Imposto de Circulação de Mercadorias e Serviços.

[118] Brazilian Constitution, article 155, II.

[119] Brazilian Constitution, article 155, paragraph 2, I.

[120] Brazilian Constitution, article 155, paragraph 2, III.

[121] Brazilian Constitution, article 155, X, a.

[122] In Portuguese, IPVA, Imposto sobre Veículos Automotores.

[123] Brazilian Constitution, article 158, III.

[124] In Portuguese, IPTU, Imposto Predial e Territorial Urbano. Brazilian Constitution, article 156, I.

[125] Brazilian Constitution, article 156, paragraph 1, I.

[126] Brazilian Constitution, article 156, paragraph 1, II.

[127] In Portuguese it is known as SISA, an ancient name from an old tax levy by Portugal.

[128] Brazilian Constitution, article 156, II.

[129] Brazilian Constitution, article 156, paragraph 2, II.

[130] Brazilian Constitution, article 156, paragraph 2, I.

[131] In Portuguese ISS, Imposto sobre Serviços. Brazilian Constitution, article 156, III.

[132] In spite of the fact that the Ministry of Security and Social Assistance in is charge on the social contribution applicable to the payroll.

[133] Brazilian constitution, article 84, I.

[134] In Portuguese, SRF, Secretaria da Receita Federal.

[135] In Portuguese, DRF, Delegacias da Receita Federal.

[136] In Portuguese, ESAF, Escola Superior de Administração Fazendária.

[137] Brazilian Constitution, article 37, I.

[138] Brazilian Constitution, article 37, II.

[139] Brazilian Constitution, article 37, III.

[140] Brazilian Constitution, article 41.

[141] In Portuguese, Delegado.

[142] In Portuguese, Superintende da Receita Federal.

[143] In Portuguese, AFTN, Auditor Fiscal do Tesouro Nacional.

[144] Brazilian Constitution, article 5o. , XXV. The law shall not exclude any injury or threat to a right from the consideration of the Judicial Power.

[145] In Portuguese, PGFN, Procuradoria Geral da Fazenda Nacional.

[146] Brazilian Constitution, article 131, paragraph 3.

[147] Law 6830/1980.

[148] Brazilian constitution, article 5o., LXIX.

[149] Brazilian constitution, article 128, paragraph 1.

[150] Brazilian constitution, article 133.