ICMS: What is the Tax on the Circulation of Goods and Services?

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The ICMS (Tax on the Circulation of Goods and Services) is fundamental in the Brazilian tax scenario, one of the main sources of revenue for states and is included in the price of the vast majority of goods and services, being a tax under state jurisdiction.

Understanding its nuances is crucial for entrepreneurs, as it makes it possible to identify which products are subject to taxation, how to calculate the applicable rates and make the appropriate collection.

Today we will understand what ICMS is, how it is applied, its relevance, calculation methods and other essential details for a comprehensive understanding of this tax.

Continue reading and find out everything about ICMS!

Index
What is ICMS?
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How to calculate the Tax on the Circulation of Goods and Services?
ICMS incidence
Who must contribute to ICMS?
Importance and characteristics of ICMS
Conclusion
What is ICMS?

What is the Tax on the Circulation of Goods and Services? (image: archive)
The Tax on the Circulation of Goods and Provision of Interstate and Intermunicipal Transport and Communication Services is a state tax obligation that applies to the movement of goods in general.

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It is a tax that is applied indirectly, that is, its value is included in the final price of the products or services sold. It is triggered when the ownership of the goods or service passes to the consumer, that is, when the sale is made.

While consumers bear the tax indirectly, included in the value of products and services, businesspeople are responsible for observing ICMS rates and complying with their tax obligations in all transactions.

It is up to the states and the Federal District to establish tax rates and regulations for taxpayers, taking into account various criteria, such as the origin and destination of the goods, the type of company and the customer.

In Tax Law, a rate is the percentage or fixed value that will be applied to calculate the value of a tax.

Tax-related agreements are regulated by the National Council for Tax Policy (CONFAZ) , composed of the Secretaries of Finance, Taxation or Finance of each state and the Minister of Finance.

Its function is to promote tax harmonization between the states of the Federation, aiming at the standardization and simplification of tax regulations throughout the country.

Each Brazilian state has the autonomy to establish its own ICMS rules and rates, as long as they respect the minimum requirements defined by the Federal Constitution and the National Tax Code.

Read also >>>>> Credit control: how to manage it in your restaurant?

How to calculate the Tax on the Circulation of Goods and Services?

What is the Tax on the Circulation of Goods and Services? (image: archive)
Determining the ICMS involves a simple process of multiplying the value of the goods or services by the corresponding tax rate, expressed as a percentage. The following formula is used:

Price of goods×Rate = Value of ICMS on goods

For example, imagine you run a restaurant and sell a product for R$1,000.

If the applicable ICMS rate is 18%, the calculation would be as follows:

R$1,000 × 18% = R$180.00

Therefore, in this case, the ICMS amount due would be R$180 on the product transaction. It is important to note that each state has its own tax rate, and it is the entrepreneur's responsibility to consult the current table to calculate the tax.

Furthermore, we remind you that the ICMS value varies according to the origin and destination of the goods, as rates differ between internal transactions (within the same state) and interstate transactions (between states) .

ICMS incidence
ICMS is levied on a variety of transactions, including sales and transfers of products, transportation between Brazilian municipalities or states, import of goods, provision of services abroad and telecommunications services.

However, there are some exceptions where ICMS is not levied, such as the sale of books, newspapers and periodicals, export of goods, operations related to electricity and oil, among others.

Who must contribute to ICMS?
Those who carry out operations subject to the tax and who are duly registered with the State Finance Department (Sefaz) in their region must contribute to ICMS.

When should I pay ICMS? When I perform any of the following operations:

Circulation of goods. However, we emphasize that there is no requirement to charge if the circulation of goods occurs between establishments of the same owner;
Import of goods and merchandise;
Interstate and intercity transport services;
Telecommunication services;
Supply of goods with provision of services;
Entry, into the destination state, of oil, lubricants, liquid and gaseous fuels and electrical energy, when not intended for commercialization or industrialization.
In other words, any person, whether natural or legal, who carries out transactions involving the circulation of goods and is included in the examples above must pay the tax.

It is important to highlight that some operations are exempt from ICMS by legal determination, such as those related to the export of goods and other situations provided for in the legislation.

Importance and characteristics of ICMS
ICMS plays a crucial role in the collection of Brazilian states, being one of the main sources of revenue to finance their economic activities.

It has specific characteristics, being a tax with a fiscal, real, proportional and multi-phase purpose. Its correct application and payment are essential to maintain the company's regularity with the tax authorities and avoid tax problems.

Conclusion
ICMS is a tax of utmost importance and complexity for Brazil's tax structure.

Its correct interpretation and application, such as proper pricing in restaurants , are fundamental to ensuring companies' tax compliance and promoting an effective contribution to the country's economic development.

Therefore, it is highly recommended to seek the support of specialized professionals, such as accountants, to adequately deal with obligations related to ICMS and other tax issues.

This partnership ensures not only legal compliance, but also the optimization of the company's financial resources and compliance with its tax responsibilities.