Written by Brazil’s temporary admission regime (regime de admissão temporária) allows certain goods to temporarily enter Brazil without the payment of import-related taxes. This is a very tax-effective way to bring goods into Brazil.
Quick read:
- Lower taxes: Goods subject to the regime will be subject to just 1% of the total Federal taxes (and State taxes in many States) payable for each month that the goods remain in the country.
- Up to 100 months: The amount of time the goods can remain in Brazil under each type of regime depends on the type of goods and how they will be used. Under the temporary admission regime for economic use, the goods cannot stay in Brazil for longer than 100 months.
- Goods can be re-exported or stay in Brazil: The goods must leave Brazil before the end of the time set by customs authorities or else all import-related taxes will be payable together with very high interest (taxes paid while the goods were under the regime are offset).
- Insurance is important: Unless the goods are re-exported, destroyed in accordance with customs rules or gifted to customs, the importer will be liable for the full amount of taxes, regardless of fault. Hence, insurance should be obtained for the full value of the goods plus applicable taxes.
- Importer must apply: The Brazilian importer must apply for the regime.
- Put it in writing: A well-drafted agreement with the importer will protect you from importers that do not return the goods.
Background
Brazil has very high import-related taxes. However, it is possible to reduce this burden by importing goods temporarily if the requirements of the temporary admission regime are met.
What is the temporary admission regime? To what goods does each type of regime apply?
The temporary admission regime is considered a “special customs regime”, which means that specific rules apply to it. It is subdivided into three types:
- temporary admission for economic use, which applies to most goods and uses, and provides for taxes to apply in proportion to the time the goods stay in Brazil;
- temporary admission with total suspension of payment of taxes, which applies to specific goods and uses, and are free of import-related taxes; and
- temporary admission for active improvement, which applies to those goods imported to be improved, assembled, renovated, reconditioned, refurbished, repaired or maintained, and are also free of import-related taxes.
One of the main advantages of the temporary admission regime is that it allows for second-hand goods to be imported into Brazil. This temporary entry especially useful, as second-hand goods generally may only be imported if the importer proves that the type of good is not manufactured in Brazil and that it cannot be replaced by other goods manufactured in Brazil. A special licence is required for importing second-hand goods.
Temporary admission for economic use
The temporary admission regime for economic use applies to most goods that are imported into Brazil temporarily. It includes the importing of goods used for the provision of services to any third parties as well as for the manufacturing of other goods destined for sale.
Under this regime, for each month that the good stays in Brazil only 1% of the total taxes that would have been payable if the good had been imported outright will be payable.
Importantly, any replacement parts that are required for the goods imported under the regime will enter Brazil free of import-related taxes.
Only the importer can seek the application of the temporary admission for economic use regime and the maximum length of time that the good can remain in Brazil is 100 months.
The early 2018 amendments now make it clear that the tax officer responsible for assessing the application for the regime may refuse it if the length of time requested by the party for the goods to remain in Brazil is not compatible with its declared use. If the officer refuses the application the importer may file an administrative appeal or seek a writ of mandamus (mandado de segurança) from the courts.
Temporary admission with total suspension of payment of taxes
The temporary admission regime with total suspension of payment of taxes applies to a limited number of import transactions.
Where the regime conditions are met, import duty, tax on industrialised products (IPI), PIS-Import and COFINS-Import, Cide (but only as it applies to fuels) and the AFRMM – all Federal taxes – are not payable. Similar exemptions generally apply at State level for State taxes, depending on the destination of the goods as well as other criteria.
The regime applies to:
- goods imported for cultural, scientific, technical, political, educational, sporting, religious, commercial or industrial events (such as trade fairs and the like);
- goods to be used for scientific and technological development approved by Brazil’s CNPq (and CNPq-registered entities) and by Finep;
- goods imported for the assembly, maintenance or repair of foreign goods currently in Brazil;
- goods imported for the testing and registration purposes during the development of products;
- goods imported for the replacement of goods previously imported but still under warranty;
- goods imported to be used as moulds for the manufacturing of phonograms and audiovisual works;
- goods imported for audiovisual productions and equipment to be used by radio, television and the press generally;
- goods imported for marketing purposes, including commercial samples not to be sold in the country;
- goods used for humanitarian clinical and surgical services provided free of charge;
- animals for exhibitions;
- goods used for assistance in situations causing damage or threatening to cause damage to the population or the environment;
- goods to be used for military events or operations, for carrying out maintenance or repair in Brazil’s CNAAA nuclear power plant and for satellite launches;
- goods to be used for benchmarking of measuring equipment approved by Inmetro;
- foreign aircraft where the trip is not part of a regular service and no fees are paid for the use of the aircraft;
- vehicles (including boats) used by travellers temporarily staying in the country;
- goods used in exploration and extraction of petroleum and natural gas (only until 31 December 2020 and specific rules apply);
- machinery, equipment, appliances, instruments and tools, including spare parts, for the transportation, warehousing and re-gasification of liquefied natural gas (only until 31 December 2020);
- goods to be used in the Manaus Free-Trade Zone (only until 4 October 2023);
- stamps for inspection controls issued by foreign countries to be used on products to be exported to those countries.
The addition of stamps for inspection controls to the regime is helpful as until the passing of the most recent amending regulation Brazilian exporters would need to go through the standard import process and subsequently seek drawback credits, which had a negative impact on manufacturers’ cash flows.
In addition to the advantage of the exemption of those taxes mentioned above, the temporary admission regime with total suspension of payment of taxes allows the entity organising the event where the goods are going to be sent, and the entity responsible for the logistics and customs clearance, to act as importers. This is unique under Brazilian law, where the importer of record invariably needs to be the party purchasing or leasing the goods for its own benefit.
Temporary admission for active improvement
The temporary admission regime for active improvement regime only applies to the goods that are imported into Brazil to undergo improvement, assembly, renovation, reconditioning, refurbishing, repair or maintenance. Note that unlike the other two types of temporary admission, here it is the actual good being imported that will undergo improvements or repairs (that is, the good will not be used). Also, under this type of regime, no security is required to be provided to the tax authorities. However, in the import declaration, the applicant must provide a description of the industrial process to be carried out in Brazil as well as details about the outcome of the industrialisation process to be granted the benefits of the regime.
While the temporary admission for active improvement regime remains in force, the goods may be sent abroad temporarily. Prior to the 2018 changes, the goods could only be sent abroad for tests and demonstrations for subsequent return to Brazil. However, now they may also be sent abroad for maintenance and repairs to be returned after without losing the benefits of the regime.
What about State taxes?
States are allowed to provide tax exemptions for goods imported under the temporary admission regime. For instance, the State of São Paulo’s ICMS Regulations provide that State tax over the movement of goods (ICMS) will apply to those goods under the economic use regime in proportion to the time that they stay in Brazil. However, this will only apply if the goods are imported and re-exported through the State of São Paulo.
The other two types of temporary admission regimes are also contemplated, so where they apply and the State’s requirements are met, no ICMS is payable in the State of São Paulo.
What about taxes on services?
Any services that may be supplied by the foreign company as part of a package to the Brazilian importer will be taxed as a service. Depending on the type of service and the Brazilian importer, the taxes over the services component can be hefty.
Can you use ATA Carnets?
ATA Carnets are “international customs documents permitting the duty-free and tax-free temporary export and import of goods for up to one year”. ATA Carnets can be used for the purposes of clearing goods that enter Brazil under the temporary admission regime.
Termination and risks
The temporary admission regime will be terminated when the goods are re-exported, destroyed strictly in accordance with the rules, gifted over to customs (if customs accepts it; this is done at custom’s sole discretion) or imported for consumption (that is, imported permanently). If any of the first three occurs, no additional taxes are payable.
However, if the importer decides to purchase the goods imported under the temporary admission regime, the importer will have to pay all taxes that would have been payable at the time when the goods were first imported, in addition to interest set at 12% per annum plus interest set at the Brazilian Central Bank’s benchmark rate. The taxes paid while the good stayed in Brazil under the auspices of the regime will be discounted from the final tax bill.
There are two risks which commonly affect deals involving goods subject to the temporary admission regime:
- when the goods are stolen or accidentally destroyed; and
- when the goods are not returned by the importer.
Insurance is often available for theft and accidental destruction of the goods. It is important that the policy covers both the customs value of the goods as well as the taxes that will apply if they are stolen or accidentally destroyed. Unfortunately, this is often neglected by parties making a deal involving the temporary import of goods into Brazil.
Finally, a professionally drafted contract is key for foreign exporters to receive goods back from the Brazilian importer at the agreed time and to receive full compensation if the goods are damaged, lost or stolen.
The Brazilian Federal Revenue’s regulation can be accessed here.
Questions?
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Importing low tax taxes on goods taxes on services temporary entry temporary imports
Last modified: December 19, 2019
The site is managed by Fabiano Deffenti, a lawyer admitted to practise in Brazil and Australia, enrolled as a barrister and solicitor in New Zealand and licensed as an attorney-at-law in New York.
