A tax substitution specifier code.

The CEST code allows standardizing and identifying goods that can be subjected to the tax substitution regime and the anticipation of ICMS tax collection. This code is regulated in the Agreement ICMS 92/15.

A fiscal code on operations and services.

This numeric code identifies the nature of movements of goods or the provision of transport services. The code must be included on all fiscal documents of the company, such as invoices, bill of lading, fiscal books, and other digital books required by law, for the receipt and shipment of goods and the acquisition of goods and services.

The CFOP is established by the federal government of Brazil and identifies, on each invoice, all the circumstances that affect the taxability of every item included on a fiscal invoice (Nota Fiscal). Each code consists of four digits. The first digit identifies whether the operation is an entry or an exit of goods.

For inbound operations, these codes are used:

• 1000 – Entry of goods, services, or both, from the state
• 2000 – Entry of goods, services, or both, from other states
• 3000 – Entry of goods, services, or both, from abroad

For outbound operations, these codes are used:

• 5000 – Supply of goods outputs or services inside the state
• 6000 – Supply of goods outputs or services in other states
• 7000 – Supply of goods outputs or services abroad

A contribution for the financing of social security.

The COFINS is a federal tax imposed monthly on gross revenue earned by legal entities.

The COFINS is used to finance the social security system.

The calculation method is generally non-cumulative. The COFINS is levied on gross revenue at 7.6%, with deductions of input tax credits for expenses that are strictly connected to the company's business and provided for in the regulating laws.

A poverty alleviation fund.

The FCP is provided for in the federal constitution and can be adopted by the states, provided that it is regulated in its legislation. The FCP is an additional tax to the ICMS. This tax is levied on transactions with certain products, which is defined in the legislation of each state.

The FCP is levied on internal operations, services, or both, and on interstate transactions that are subject to the tax substitution regime. The FCP is also levied on interstate sales to the final consumer who does not pay the ICMS and must be calculated based on the legislation of the state of the destination of the goods.

The FCP is regulated in each state legislation. In some states, this tax is levied on specific products.

A tax on the movement of merchandise and services.

The ICMS is a state value-added tax on sales and services that applies to the movement of goods, transportation, communication services, and other general supplying of goods.

• An interstate ICMS tax is charged when goods are moved from one state to another.
• The ICMS tax substitution system (ICMS-ST, Substituição Tributária do ICMS) is a tax collection mechanism designed to avoid double taxation and tax evasion. In this process, the manufacturer generally retains and pays taxes on behalf of the reseller or distributor.

A tax on industrialized products.

The IPI is a federal tax charged by the federal government of Brazil on national and foreign finished goods. Finished goods are goods that are produced as a result of an industrial process, even if the process is incomplete, partial, or intermediary. IPI applies to these taxable events:

• The shipment of finished goods from an industrial establishment, or a similar establishment, in Brazil
• The customs clearance of finished goods of foreign origin

A municipal service tax.

The tax rate varies from one municipality or city to another, and the tax is payable monthly.

The Brazilian institute of geography and statistics.

The IBGE is the agency responsible for the official collection of statistical, geographic, cartographic, geodetic, and environmental information in Brazil. The IBGE defines tables of area codes, in which geographic areas of different levels are associated with a numeric code. These codes can be used to organize statistical system information and for other purposes.

The Mercosur common nomenclature.

This NCM code is eight digits long. This code is established by the government of Brazil to identify the nature of the goods, promote the development of international trade, and to collect and analyze foreign trade statistics.

All goods that are imported or purchased in Brazil require an NCM code for legal documentation, for example invoices and legal books, so that items can be classified as per the Mercosur regulations.

The NCM has been adopted by Argentina, Brazil, Paraguay, and Uruguay. Because the NCM code is based on the International Harmonized System (HS), it is referred as NCM/SH. The first six digits represent the HS classification, and the last two digits is part of the Mercosur specific specifications.

A program of social integration.

The PIS is a federal tax that is imposed monthly on gross revenue earned by legal entities.

A tax substitution regime.

See Imposto Sobre a Circulação de Mercadorias e Serviços (ICMS).

A table of taxes on industrialized products.

The TIPI is a list of tax rates for products, as per the NCM classification. The TIPI exception code indicates that the IPI rate differs from the rate applied to that NCM.

This table shows an example of TIPI table for newsprint, in rolls or sheets:

NCM	Product description	IPI rate
4801.00	Newsprint, in rolls or sheets
4801.00.20	In sheets with no side that exceeds 360 mm, if not folded	5,00
4801.00.30	Other, of a weight that do not exceed 57 g./m2, of which at least 65% of the weight of the total fiber content consists of wood fibers obtained by a mechanical process	15,00
	Exception 01: in rolls of a width that do not exceed 36 cm	5,00
4801.00.90	Others	15,00
	Exception 01: in rolls of a width that do not exceed 36 cm	5,00

For example, the IPI rate for code 4801.00.30 is 15%, but if it is in rolls of a width that do not exceed 36 cm, the rate is 5%, as per exception 01.

A federative unit.

The Federative Republic of Brazil is a union of 27 federative units:

• 26 states (estados), generally based on historical, conventional borders that have developed over time.
• One federal district (distrito federal), where the federal capital, Brasília, is located.

  The federal district is not a state, but shares some characteristics with a state and a municipality.