E-commerce in Brazil remained unregulated until recent years, when the government introduced laws regarding this sector. In this article we will highlight the most relevant factors for the compliance of e-commerce operations in Brazil.
Creating and managing a virtual shop in Brazil may be in fact quite similar, in legal terms, to opening a physical one but there are some differentiating factors between the two that must not be ignored.
- State Board of Trade
- Federal Revenue Service, or Receita Federal
- State Treasury Office
- City Council
The documents and information required for each institution varies, but there are general data required for all of the processes. The first is to select a name and type of company for the store. A detailed overview of the types of companies in Brazil can be found here.
Secondly, the company must be registered at the Federal Revenue Service to obtain a CNPJ number, which is the company’s taxpayer ID.
The taxes required for e-commerce companies are pretty much identical to the ones needed for physical stores, and are divided into two categories: products and services. A list of these includes:
- ICMS: The taxation for products and merchandise, payable to state and varying according to the state
- ISS: Taxation for services directed to municipalities that varies according to the service rendered and the applicable rates defined by each municipality
- CSLL: Federal taxation based on company profit directed to social security
- PIS and COFINS: Federal taxation on revenue directed to social security
There are also special taxation schemes for companies with limited revenue, which can includes e-commerce companies. Those are:
- MEI: A special taxation regime for small companies with less than BRL 60.000,00 in revenue per year which includes a variety of otherwise more cumbersome taxes. The rate is around BRL 40,00 per month
- Simples Nacional: This regime is applicable for companies with revenue inferior to BRL 3,6 M
These special taxation schemes cannot be utilized if the Brazilian company is a branch of an international company. It is also important to note that these taxes are applicable to the state from which the product is shipped, and not the state to where it is delivered. A fiscal law project called "Protocolo 21", that introduced the double taxation for product delivery for both the emitting and receiving states, was considered unconstitutional by the Brazilian Supreme court in September 2014 and did not proceed to be put into action.
Regulation for E-Commerce Pages
A Federal law put into force in 2013 instituted that e-commerce pages must necessarily display and highlight important information for the consumer and guarantee a clear and transparent transaction. Some of the specifications of this law include:
- Physical and digital addresses, and other information required for location and contact of the company, such as telephone number and email
- Company name and CNPJ number
- Essential characteristics of product or service, including health and safety information
- Detailed pricing of additional fees such as delivery and warranty
- Adequate presentation of pricing, with clear definition of additional charges.
- Provided calculations for additional charges, in case the pricing depends on the delivery address location, before the transaction is completed
- Details on the product offer, including payment methods, availability and service, delivery or handling types and due dates
- Clear and detailed information on any restriction on the product offer
Another facet of this law refers to the “regret period”, or the time available for the customer to return the product or cancel the service, which is set at 7 days after the product is received. Within this period, the e-commerce operator must offer means for the customer to cancel its order with the return of the full amount paid without any additional charges.
Other requirements for e-commerce companies include a customer service, whether through telephone, email, chat or social networks, made available before and after the purchase. Additionally, e-commerce sites must employ safety mechanisms to protect consumer data, such as an https URL, SSL encryption and software to detect possible frauds in transactions.
Manage Compliance in Brazil
One of the most complicated and time consuming parts of an e-commerce operation in Brazil is to make sure that you are compliant with current laws and regulations for the industry.
Digital River is a company that have local experience in navigating the Brazilian regulatory landscape and provide software and services tailored for international e-commerce companies that want to start operations in Brazil.
Using an e-commerce solution that is not tailored to the Brazilian regulatory environment will most likely cause customer dissatisfaction and costly fines down the road. The complexity of Brazilian taxation is one of the major compliance challenges when trying to adapt international e-commerce solutions to the Brazilian market.
To better illustrate the complexity of this issue, here are a couple of actual examples of what an e-commerce solution must handle:
- Software products can be classified as either off-the-shelf product, services, subscriptions. Each with separate tax rules depending on the city where the software is sold or rendered.
- Each item in an order may belong to a different tax class. Also, the tax rate can depend on the total value of items within the same class.
Working with global partners with local expertise like Digital River will significantly reduce the compliance risk of establishing an e-commerce operation in Brazil.