b'Brazils Tax Enigma: Why is Importing So Expensive?Simply understand how Brazilian taxes transform foreign products into a financial and logistical challenge for companies and consumers.Imagine buying a product abroad, like a4. The big accelerator: Tax on CirculationBureaucracy and delays: Navigating special high-precision bearing for yourof Goods and Services (ICMS) this intricate web of rules and calculations factory. The price overseas seems good.Now we reach the final boss of importdemands time, specialised knowledge, But once it arrives in Brazil, that pricetaxes: the ICMS (Tax on Circulationand generates more paperwork. This can doubles or triples. Why? The answer liesof Goods and Services). This is adelay the arrival of essential inputs.in a complex tax system, which we willstate tax, meaning its percentage canIn summary, importing into Brazil is unravel step by step. vary depending on the Brazilian statenot just about bringing a product from 1. The first toll: import tax (II) where the product will be sold. Theabroad; its a journey where each tax adds As soon as a product crosses thekey differentiator of ICMS is how itsa layer of cost and complexity. For the Brazilian border, the first tax applied iscalculated. Its levied on EVERYTHINGBrazilian market to compete globally and the Import Tax (II). Think of it as an entrythat came before: the products originaloffer innovative products, simplifying and fee for the product in the country. Theprice, II, IPI, PIS, COFINS, freight, customsrationalising this tax system is crucial, percentage varies greatly depending onfees, and even on the ICMS itself (ICMSmaking import a smoother and less the product type. por dentro or inside ICMS). Thisburdensome process for all.significantly inflates the cost due to itsConsider this: A product with an FOB 2. The manufacturing tax: Tax oncumulative calculation method. (Free On Board) cost of $100 abroad, Industrialised Products (IPI) Real business impact after incurring all the Brazilian import Next comes the IPI (Tax on IndustrialisedFor companies like Guilhermestaxes, (II, IPI, PIS, COFINS, and especially Products). It applies to manufactured or(Ipanema), which distributes bearings toICMS), can easily see its final cost in processed goods. This tax is calculatedindustries such as metallurgy, sugar, andBrazil escalate to $200 or even $250.not just on the products original price,alcohol, or for reducer repairers, this taxThis dramatic increase highlights the but on the price that already includesscenario has direct consequences: significant financial hurdle faced by the Import Tax, beginning the process ofbusinesses when sourcing materials tax on tax. High costs: Imported productsinternationally due to the compounded 3. The social contributions: PISbecome very expensive, raising finaleffect of these various taxes.and COFINS prices for industries, making themless competitive. To sum up, that is why Brazilian people Still at the federal level, there is PISComplex inventory management:are always asking for discounts.(Social Integration Program) and COFINSWith such costly products, extreme careContact here: (Contribution for the Financing of Socialis needed in managing inventory. Holding+55 11 33501811Security). Although not called taxes,large volumes of bearings means a lotguilherme@ipanemarolamentos.com.br they function similarly, funding socialof capital is tied up or stuck in already www.ipanemarolamentos.com.brprograms and social security. Thesepaid taxes.contributions are also levied on the products value after the preceding taxesLimited access to technology: High have been added. taxes discourage the import of newer, more efficient technologies,hindering innovation. Guilherme Cestari41'