Brazil’s Ecommerce Compliance Program (PRC): Understanding Tax Advantages

Brazil PRC Key Highlights:

• Brazil introduced new import regulations for ecommerce brands, offering tax breaks and quicker customs clearance for companies enrolled in the Programa Remessa Conforme (PRC).
• PRC-registered companies benefit from a reduced import duty of 20% on shipments valued up to $50 USD, including shipping and insurance (CIF).
• Shipments valued over $50 USD from PRC-registered companies are subject to a 60% import duty, with a $20 reduction on the duty payment.
• PRC participants must collect import duty and ICMS (State Tax) from customers prior to shipping and inform them about the product’s origin and its total value, including federal and state taxes.
• Non-PRC registered businesses are still subject to the 60% import duty on all shipments.
• ICMS tax is now standardized at 17% across all regions in Brazil.

Brazil has taken a significant step forward in the global ecommerce space by creating a compliance program that will change the way companies navigate duties and taxes in the Brazilian market. This initiative is particularly impactful for direct-to-consumer (DTC) brands, providing some relief from substantial import tariffs and offering them a more streamlined and transparent approach to doing business in the country. In this article, we’ll dive into the intricacies of import taxes in Brazil, changes brought about by this new directive, and potential benefits for merchants.

What is Brazil’s Ecommerce Compliance Program (PRC)?

In the Fall of 2023, Brazil launched the Programa Remessa Conforme (PRC), a compliance program for ecommerce businesses introducing new import regulations. This initiative aims to expedite customs processes and provide tax advantages for registered companies.

Under the most recent updates effective August 1, 2024, participants in the PRC program must collect a 17% ICMS state tax (Brazil’s value-added tax) prior to shipping. They will also be charged a reduced import tax of 20% on shipments valued up to $50 USD and a 60% import tax on those ranging from $50.01 USD to $3,000 USD, with a $20 USD reduction on the duty tax payment. Shipments valued over $3,000 USD require formal customs clearance. 

For determining the applicable tax rate and value limits, the CIF value, which includes the cost of transportation and insurance, must be used.

How to Calculate Landed Cost for PRC Shipments to Brazil

Let’s review the first row in the table above. Follow this step-by-step breakdown to calculate the total landed cost for a PRC-registered shipment with a CIF value of $50.

1. Calculate the import duty – Multiply the CIF value ($50) by the duty rate (20%), resulting in $10.
2. Determine the Taxable Value – Add the CIF value ($50) and the import duty ($10) to get the Taxable Value, which is $60.
3. Calculate the ICMS tax – Multiply the Taxable Value ($60) by the ICMS rate (17%), resulting in $10.20.
4. Total the landed cost – Add up the CIF value ($50), the import duty ($10), and the ICMS tax ($10.20) to get a total landed cost of $70.20.

Import Tax Structure in Brazil Explained

Brazil’s complex import tax system has traditionally been a challenge for ecommerce due to the numerous variables that impact landed cost. Plus, import duties are based on the CIF price of an imported product – meaning that when assessing the value of an item for the purpose of collecting duties and taxes, the total product price, insurance costs, and shipping fees are all considered. Here’s a list of all the import taxes products are subject to when shipping to Brazil.

Brazil’s Import Taxes:

• Import Duty (II) is a federally mandated tax generally applied during customs clearance for imports to Brazil. Historically, companies have been charged a hefty import duty of 60% on all non-commercial (B2C) imports, regardless of their value. However, brands registered under the PRC can now benefit from a reduced import duty of 20% on shipments up to $50 USD, which is collected prior to shipping.
• Merchandise and Service Circulation Tax (ICMS) is a Brazilian state government value-added tax (VAT) that is now standardized at 17% across all regions. This tax is applied to the sum of a product’s CIF value plus Import Duty (II) and Industrialized Product Tax (IPI).
  
• Industrialized Product Tax (IPI) is a federal tax applied to imported manufactured products, with rates ranging from 0-15%. Its purpose is to support Brazil’s domestic production by imposing taxes on imports that compete with locally produced goods.

How to Register for Brazil PRC

Companies can register for Brazil’s new ecommerce compliance program through this PRC Certification link. It’s important to note that participants must sign a contract with either a shipping carrier or Correios (Brazil’s postal service) if they are not established as a legal entity in Brazil.

Merchants must also inform customers on their checkout page that (1) the products they are purchasing are sourced from abroad and will be imported into Brazil and (2) goods are required to clear customs and are subject to Brazilian federal and state taxes.

Additionally, landed costs should be itemized and individually display the following elements:

• Product Price
• Shipping Cost
• Insurance
• Postal Tariffs (if applicable)
• Import Tax
• ICMS Tax
• Total Sum of These Items

* Shipping and insurance costs can be included in the product price, provided that consumers are clearly notified that the displayed amount includes these charges.

Simplify International Ecommerce with Passport

For brands looking to expand their presence in Brazil, this new PRC directive presents appealing opportunities. It not only provides tax relief but also facilitates a smoother customer experience and quicker customs clearance. Companies that align themselves with this compliance program stand to gain a competitive edge in the Brazilian ecommerce market.

Partnering with an international solutions provider like Passport makes global expansion easy for ecommerce. We leverage internationalization technology, in-house shipping and compliance services, and expert guidance to help brands grow seamlessly and profitably. Whether you need support with PRC registration, ensuring checkout pages are compliant, or monitoring new tax regulations, our team is ready to assist you in navigating the Brazilian market and beyond. Simply reach out to our team here to get started.