The Social Integration Program (PIS) is a Brazilian tax designed to fund social programs and to stimulate economic growth. Established amid labor and social security reforms, the PIS has become a cornerstone of Brazil’s tax system, affecting both businesses and employees.
The PIS rate varies based on the taxpayer’s category and the nature of the transaction. Companies, for instance, pay PIS on their turnover, whereas workers may be eligible for the salary bonus, a social benefit associated with it.
However, how does the PIS fit into the intricate framework of the Brazilian economy?
The tax is commonly linked to COFINS, but for the purposes of this article, we will concentrate solely on the PIS.
In this article, we will examine this tax in greater detail, exploring:
- The calculation bases and rates
- The economic benefits
- How to meet PIS obligations
Let’s find out now about PIS in Brazil.
What is PIS in Brazil?
PIS, an acronym for Social Integration Program, is a Brazilian tax established to primarily fund social programs and economic growth. It can also be found as PIS/PASEP.
Introduced in the 1970s, the PIS has become a major tax imposed on companies’ payroll and the turnover of various sectors of the economy.
It is a tax levied on the gross revenue of companies that provide services or make imports.
What is the role of PIS in Brazil?
The revenue generated by the PIS is allocated to finance programs such as unemployment benefits and a salary bonus. This bonus is very specific in Brazilian legislation
Who is responsible for paying PIS in Brazil?
Basically, all legal entities that provide services, sell goods or make imports of goods and services to Brazil from abroad are subject to PIS. This includes both Brazilian and foreign companies operating in the country.
PIS is levied on various other operations, mainly on companies’ gross revenue. Let’s explore some of the main situations:
PIS on Gross Revenue
Provision of services: any company that provides services in Brazil is subject to PIS on the revenue earned from these services. The Brazilian companies providing services abroad are exempt from paying PIS on the revenue received from abroad.
Sales of goods: commercial companies also pay PIS on sales of their products.
Imports: companies that import goods or services must also pay PIS on the value of the import.
Other income: other company income, such as rents, financial revenue are subject to PIS, depending on the nature of the operation.
How is the PIS calculated in Brazil?
The calculation of PIS varies according to the company’s tax regime (simplified, real or presumed profit) and sometimes depends on the nature of provided services and type of selling goods. However, in general, PIS is calculated on the gross revenue of the operation, applying the corresponding rate.
In Brazil there are different tax regimes (as mentioned above) applicable to the size and revenue of the company. We won’t explore it in this article, but it’s an important issue to work on with your consultancy experts, such as Europartner.
The PIS rate can vary, but is generally expressed as a percentage of gross revenue. It is important to note that the rates can be different for services and imports, and can also be changed by specific legislation.
There are two main systems for calculating PIS:
- Cumulative regime: Applicable mainly to companies that opt for the Presumed Profit regime and certain specific activities. In this regime, the rates are 0.65% for PIS. Under the cumulative regime, tax is calculated on the total amount of revenue, without the possibility of deducting credits.
- Non-Cumulative Regime: This regime is mandatory for companies that calculate Real Profit and offers the possibility of offsetting tax credits related to inputs, operating expenses and other costs. The rates are higher, with 1.65% for PIS. However, in the non-cumulative regime, it is possible to deduct PIS credits paid in previous operations, which can reduce the amount of tax to be paid.
Recent legislative changes in 2024 included measures limiting the offsetting of PIS credits, making tax planning even more important for companies looking to maximize tax efficiency.
Read also: Brazil tax reform: the complete guide
What is the contribution rate?
The PIS rates consider three modalities that serve as the basis for defining the rates of this tax. They are:
PIS on payroll: 1%
PIS on company revenue: 0.65% or 1.65%
PIS on imports of goods: 2.1%, PIS on import of services: 1,65%
Importance of PIS in Brazil
Although PIS is a tax, it plays a fundamental role in the Brazilian economy:
Financing social programs: The funds collected from the PIS are used to finance programs such as unemployment insurance, which helps workers in times of difficulty.
Balancing competition: The PIS helps to balance competition between domestic and imported products, ensuring that foreign companies also contribute to funding Brazilian social programs.
Fostering economic development: By financing social programs, the PIS indirectly contributes to the country’s economic development by guaranteeing a minimum of social protection for the population.
Read also: Simplifying accounting in Brazil
How to Comply with PIS Obligations?
Compliance with PIS obligations is essential to avoid fines and penalties. In order to do it, it is necessary to:
Identify the tax regime: check what is the tax regime and if there are any exceptions for certain products or services.
Calculate the amount of PIS due: the calculation of PIS must be done according to the rules established by tax legislation.
Issue payment slips: Payment slips must be issued and paid within the deadlines established by the Federal Revenue.
Submit declarations: The company must submit declarations of accounting and tax information, such as the DCTF (Declaration of Federal Tax Debits and Credits), where the collected PIS values are reported.
In order to comply with PIS obligations, here are some important aspects:
Maintain organized accounting: Organized accounting facilitates the calculation and payment of PIS.
Keep up with changes in legislation: Tax legislation is constantly changing, so it is important to keep up with the news to avoid errors.
Seek professional guidance: A specialized accountant can assist in the correct interpretation of the legislation and in fulfilling tax obligations. Europartner is the best option for your company investing in Brazil.
What are the main obligations related to PIS in Brazil?
- Calculation and collection: The calculation and collection of PIS must be done accurately and within the established deadlines.
- Accounting records: PIS values must be recorded in the company’s accounting.
- Declarations: The company must submit declarations of accounting and tax information, such as the DCTF, where the collected PIS values are reported.
- Document storage: The company must keep documents related to PIS for a period determined by law.
What are the consequences of non-compliance with PIS obligations?
Non-compliance with PIS obligations can result in various consequences for the company, such as:
- Fines: The company may be fined by the Federal Revenue.
- Interest: The company will have to pay interest on the unpaid amounts.
- Inclusion in the active debt: The debt to the Treasury may be included in the active debt, which can make it difficult to obtain credit and participate in bids.
Valuable insights for an effective PIS management
The federal tax – PIS – is a significant component of Brazil’s tax system, levied on company revenue to support social security. To ensure compliance, it’s crucial to adhere to the guidelines set by the Federal Revenue Service, particularly regarding the chosen tax regime.
It is also recommended to consult specialized experts in order to guarantee correct accounting procedures and accurate compliance.
Europartner is a great option to help your company to succeed. For over 15 years the company has been in the market, dedicated to assisting businesses navigate the complexities of the Brazilian tax landscape.
Contact us today to learn how our experts can outstand your business goals.
