ICMS stands for Tax on Transactions relating to the Circulation of Goods and Provision of Interstate and Intermunicipal Transport and Communication Services, and is a Brazilian tax levied on the movement of goods in general.
The purpose of ICMS is only fiscal and the main generating fact is the circulation of goods, even those sent from abroad and received in Brazil. Thus, when there is the purchase and sale of merchandise, called exchange of ownership, there is a taxable event for the collection of the tax.
The tax is regulated by Complementary Law No. 87/1996 (Lei Kandir), which was later amended by Law No. 92/1997, 99/1999 and 102/2000.
All stages of the circulation of goods and the provision of services are subject to ICMS, and an invoice must be issued. In some states, ICMS is the main source of financial resources, which is converted into meeting the needs of citizens.
ICMS collection
The collection of ICMS is the responsibility of each Brazilian state. They must establish fixed values for the goods and the tax is collected by the State Finance Department (SEFAZ).
Each state can define the tax rate that will be charged in its territory and, therefore, the amounts may differ from one state to another.
On which products is ICMS levied?
ICMS is levied on various types of products and services, such as telecommunications, intercity and interstate transport, provision of services, and so on. Products imported from abroad are also subject to tax.
ICMS is also levied on the circulation of goods such as household appliances, food and beverages, cosmetics and many others.
ICMS free goods
The tax is not levied on some types of products. ICMS is not collected in any transaction involving the sale of books and newspapers and transactions that send goods for sale in the foreign market.
The tax is also not levied on operations relating to electricity and oil, operations with gold, leasing operations, agricultural inputs, and so on. Cars adapted for people with special needs are also free from ICMS taxation.
Also read about taxes. IPTU, VAT and IOF and see the meanings of Tax and Tribute.