How to Start a Foreign Trade Business in Brazil

It’s no surprise that the world is experiencing a significant globalization of the economy. In this context of greater integration between various production systems, even small businesses can engage in trade with economic agents from other countries.

Brazil, the largest economy in South America, has over 30,000 import and export companies. In 2020, despite the COVID-19 pandemic, the country’s trade balance closed with a surplus of nearly R$ 40 billion.

These numbers highlight the promising potential of working in foreign trade. However, we know that formalizing a company in this sector requires thorough knowledge of current legislation and an understanding of regulatory and tax systems. With that in mind, we’ve prepared a complete guide on how to start a foreign trade company. Read on to learn more.

How to Open an Import and Export Business?

The process of starting a foreign trade company is essentially the same as for any other sector. That is, you’ll need to:

Register with the Federal Revenue Service to obtain your CNPJ;
Draft the articles of incorporation;
Apply for an operating license with your municipal government;
Register the CNPJ with your state’s Board of Trade;
Obtain a fire department permit from your municipality; and
Register with your industry’s union.

On the surface, this may seem straightforward, right? However, as mentioned earlier, the foreign trade sector is full of specific requirements.

Any import or export activity involves numerous customs procedures. You’ll need to determine which requirements apply to foreign trade activities, whether with the Federal Revenue Service, the Ministry of Foreign Affairs, or authorities in other countries.

This is precisely where a specialized foreign trade accounting service makes a difference. This partner can help your business with:

Issuing import and export licenses;
Handling currency exchange transactions;
Collecting tax forms;
Identifying import and export codes for products in government information systems;
Conducting tax planning for the company;
Calculating tax rates on imported products.

How Does Taxation Work for a Foreign Trade Company?

Understanding the taxation on import and export operations is crucial for any company involved in these activities. This is because foreign trade carries significant legal and economic risks.

Failing to comply with legal requirements can result in fines for the company’s operations and other legal penalties, including the revocation of import/export licenses.

A lack of knowledge of tax legislation in this sector can also lead to paying more taxes than necessary, or failing to organize operations to take advantage of tax benefits.

In either case, the company will have paid more taxes than it needed to, losing a competitive edge against competitors who understand these processes. For those who want to better understand the taxation of foreign trade operations, we’ve prepared a brief summary of the key points you need to know.

What Is the Import Tax?

The import tax is a customs duty that falls under federal jurisdiction. The Union is responsible for setting the tax rate and the method of calculation.

The triggering event for this tax is the entry of foreign products into the country. Therefore, each batch of imported goods is subject to this tax.

In Brazil, the customs process for charging import tax includes the following stages:

fase administrativa: acontece na organização de documentos como licenciamento de importação;
fase fiscal: tratamento aduaneiro de verificação das informações declaradas;
fase cambial: compra da moeda estrangeira e pagamento internacional das mercadorias por instituição financeira autorizada pelo Banco Central.

What Are the Main Taxes Associated with Imports?

In addition to the import tax, several other taxes may apply to the operations of an import or export company.

Industrialized Products Tax (IPI)

The IPI tax applies to all industrialized products, both domestic and foreign, and falls under federal jurisdiction.

Tax on the Circulation of Goods and Services (ICMS)

The ICMS is a state tax that applies to all operations involving the circulation of goods and services, including interstate, intermunicipal, and communication services.

Tax on Services of Any Nature (ISSQN)

The ISSQN is a municipal tax that applies to services originating from outside the country or services that began outside Brazilian territory.

PIS and COFINS Importation

These are federal social contributions aimed at financing social security, and they apply to the importation of foreign products.

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How to Calculate the Due Taxes?

To facilitate the tax management of companies operating in foreign trade, the Federal Revenue Service provides an online simulator called the Simulador do Tratamento Tributário e Administrativo das Importações. By entering all the relevant information for the operation, the system calculates the applicable taxes and identifies the administrative controls required for the imported goods.

To use this tool, you’ll need to provide key information such as:

The customs classification of the goods;
The estimated customs value; and
The currency corresponding to the declared customs value.

What Other Costs Are Associated with Corporate Importation?

Unfortunately, the costs of import operations aren’t limited to taxation. An import company must also consider expenses such as shipping and insurance for the goods being traded. Additionally, there are bank fees and other costs related to the imported product.

Certain products, for example, may be subject to specific customs duties, among other financial obligations required by your trade partner.

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How CLM Controller Can Help Your Business

Managing the logistics of foreign trade activities is challenging for most companies. When it comes to tax issues, as we’ve discussed in this guide, things can get even more complicated.

In this context, a specialized accounting service for import and export activities is essential for businesses aiming to build an efficient operation. For companies seeking to reduce taxes on import operations, for example, this service is highly recommended.