Tax substitution

With tax substitution, the law chooses a third person to comply with the tax liability, rather than the natural taxpayer.

Brazil specifics

The ICMS tax substitution is in the Brazil Constitution of 1988. The responsibility to pay tax or a contribution against a taxable event in the future can be assigned to a passive taxpayer. If the expected event does not occur, the immediate and preferential refund of the amount paid is secured.

For a better understanding, it can be said that this system basically consists of collecting the tax due in subsequent operations, before the triggering event. The corresponding tax must be withheld and paid before a later departure or movement of goods.

The products that are subject to the tax substitution are listed in Covenants, Protocols, and State laws.