Brazil

Electric energy invoice update Brazil’s e-invoicing system differs significantly from other countries, and arguably can be said to have one of the most challenging tax systems in the world.  Brazil’s tax topography is complicated, typically hosting a different e-invoicing format for different services. For example, Brazil holds a different invoice format specifically for energy services, also referred to as NF3-e.  This month, via an official publication in the Diario Oficial da Uniao), Brazil has delayed the mandatory implementation of the NF3-e in line with the following: 

• 1 June 2023: Minas Gerais 
• 1 October 2023: Espirito Santo 
• 1 January 2024: Santa Catarina 
• 1 June 2024: Sao Paulo  

These changes took effect on 17 May 2023, with the date of their publication present in the Diário Oficial da União (DOU).  You can refer to further e-invoicing developments in Brazil on our dedicated country-specific page here. 

Major fiscal reforms Our recent post commented on the political changeover in Brazil. As is often the case, political shifts correspond with significant fiscal adjustments, as new governments seek to assert their own agendas on the wider economic framework.  True to promise, the new government in Brazil appears to be preparing to implement major fiscal changes in the country that look set to permanently alter the fiscal circuit in the country.   The reforms, expected to take place from 2026, will merge the current five levies in the country into a value-added tax (VAT) with separate federal and regional rates.   In a long-term indication of Brazil’s ambitious plans, tax will be determined from where goods are consumed as opposed to where they are produced, stretching over a 50-year transition period commencing from 2029.  The tax reforms are radical and will inevitably spawn debate in the Senate. Currently, the reform has been approved by the Lower Congress, and will now be sent to Senate for a definitive conclusion.  Kofax will monitor further updates in respect of the same.   South America is currently hosting some exciting e-invoicing  developments in the region- you can read more about these here. 

NF3-e implementation postponed for the State of Espírito Santo The mandatory implementation of the NF3-e has been postponed to 1 June 2023 for the state of Espírito Santo. The NF3-e refers to a specific type of invoice in Brazil- the Electric Energy Electronic invoice. The postponement has been captured in the Ajuste Sinief 2/2023. The updated timeline in respect of the NF3-e implementation looks set for the following trajectory:

• 1 June 2022: Mato Grosso
• 1 October 2022: Alagoas, Amapá, Amazonas, Bahia, Maranhão, Mato Grosso do Sul, Pará, Paraíba, Pernambuco, Piauí, Rio de Janeiro, Rio Grande do Norte, Rondônia and Sergipe
• 1 December 2022: Acre
• 1 February 2023: Roraima
• 1 April 2023: Tocantins
• 1 June 2023: Espírito Santo, Santa Catarina, São Paulo and Minas Gerais

You can read more about e-invoicing in Brazil on our country-specific page here.

‘Service’ invoicing delay for select taxpayers Small individual entrepreneurs in Brazil were obligated to use mandatory electronic billing for service invoices from 3 April 2023. This requirement has now been delayed to 1 September 2023. This was likely triggered by a lack of readiness to meet the needs of electronic e-invoicing.  An NFS-e refers to an e-invoice for services in Brazil and provides important information in respect of the service provider, as well as the amount paid.  You can read more about e-invoicing in Brazil on our dedicated country-specific page here. 

Overhaul of indirect tax regime New governments often herald the introduction of widespread new fiscal policies. President Lula’s recent appointment in Brazil is expected to be synonymous with the introduction of colossal VAT reforms in Brazil. Arguably, this is needed- Brazil has one of the most complex indirect tax regimes in the world, and so a significant part of this change would be the simplification of the tax process in the country. Some proposals put forward as part of this simplification process include:

• A sub-national VAT on goods and services
• A second VAT tax at federal level.

E-invoicing momentum is accelerating in South America, and Tungsten is keeping abreast of e-invoicing developments in the region. We will closely monitor e-invoicing developments in Brazil.

Update on e-invoicing system for service invoices (NFS-e) The implementation of the NFS-e endeavours to accomplish a dual purpose: to facilitate the tax process for taxpayers but also to be a database (ADN - National Data Environment) to be used by the tax authorities in the event of inspections. The national standard system for the NFS-e (Service e-Invoice) in Brazil is currently at testing stage, with only seven cities selected to start the pilot project. The municipalities can adhere to the use of the NFS-e system - both those that already have an electronic system and those that do not. Municipalities are therefore not required to use the system, however, the municipalities that do not will also not have access to the national database. As of January 2023, individual microentrepreneurs (known as MEI in Brazil) will be required to issue their service invoices from the NFS-e system.

New e-invoicing requirements In a fast-paced month for e-invoicing developments in South America, Brazilian tax authorities have announced plans for a new partial e-invoicing mandate which will require certain taxpayers to issue e-invoices via a government portal from 1^st January 2023. From 1^st January 2023, individual micro-entrepreneurs (MEI) issuing invoices e-invoices for services not subject to the Interstate Sales Tax (ICMS) are obligated to issue e-invoices. E-invoicing for supplies to individuals remains optional. Tungsten Network will continue to monitor e-invoicing developments in Brazil as we await further details relating to the mandate.