Taxation, also known as the Fiscal/Tax System, is an essential area for the functioning of countries, as it represents how the government obtains resources to finance its activities and projects. However, the particularities of this system can vary significantly between different nations, as is the case between Brazil and Portugal.
In Brazil, the Tax System is characterized by its complexity and high fiscal burden. The country has a multiplicity of taxes, fees and contributions levied on different economic activities, such as the Tax on Circulation of Goods and Services (ICMS).
ICMS is a state tax levied on the circulation of goods and provision of services, which has a very interesting feature: its variable rate in different states. Rates can vary from 7% to 25%, or even more, depending on the goods or services traded, which affects retailers’ final product prices, profitability, and inventory management. This tax disparity brings even more complexity for retail companies operating in various regions of the country!
Thus, the multiplicity of taxes in Brazil creates a challenging environment for companies and individuals, requiring good accounting and tax management, in order to ensure compliance with legal obligations and avoid problems with the IRS.
In contrast, Portugal has a more simplified tax system, with only 3 categories of taxes (income, consumption, and property). Within the "Consumption Taxes", the Value Added Tax (VAT) is the main tax, being applied to goods and services. VAT has 3 main rates:
Reduced (6%) – applied on essential products, e.g., medicines;
Intermediate (13%) – applied to specific goods, e.g., ordinary wines;
Standard (23%) – applied to most goods and services.
The underlying logic is to make essential items more accessible to the population, i.e., "the more essential, the less tax burden". For this very reason, the "Zero VAT" measure was recently implemented, which exempts 46 food products from this tax for a period of 6 months.
Despite also requiring highly qualified professionals, this simpler tax structure makes the collection process clearer for retailers, facilitating tax administration, and potentially reducing bureaucracy in comparison to the Brazilian system.
Although they have the same main goal – to collect resources for the state – tax systems differ greatly between the two countries, affecting the way businesses and individuals manage their finances and plan their economic activities in each location.
Taking all this into account, it becomes crucial: to know these particularities in order to comply with the legislation and optimize financial management; and to have a POS system that brings peace of mind to the retailer, ensuring the proper application of the tax system in question, be it simpler or more complex!
Karina Bueno, Trainee Technical Consultant