ICMS what is it and how is this tax charged?

What is ICMS? A very common question among internet users. Read the text and find out!

Micro, small, medium, and large companies face a major challenge in Brazil, among many others: understanding the Brazilian tax system and not only understanding it, but also adapting to its frequent changes to avoid suffering the consequences. 

Among the mandatory taxes for those who own a business, we want to draw attention today to... ICMS, one of the main Brazilian taxes.

Furthermore, it's not only businesses that pay ICMS (a Brazilian state tax); when we buy a product at the supermarket, the value of this tax is already included in the price, meaning we pay it indirectly.

Continue reading and discover what this tax is and how it works. 

What is ICMS? 

THE Itax Sobre THEoperations relating to WCirculation of Mmerchandise and Prestoration of Sservices of Ttransport Iinterstate and Iintermunicipal and of WCommunication is the main source of revenue for the states. 

In short, it's a tax levied on the movement of goods. Therefore, it's charged whenever there is movement of products, even if it's not for sale.

Any person or company that carries out an activity that constitutes commercial action, interstate or intercity transport and communication services, or operations involving the circulation of goods, such as sales, transfers, exchanges, etc., is required to pay this tax.

The tax rate varies from state to state; however, the common percentage is between 17% and 18% of the price of the goods.

Some activities are exempt from charges, as determined by State and Federal District Tax Legislation.

Although there is legislation with general rules, it is the state that defines what the tax rate will be. 

It is important to emphasize that all taxes are legal and are enshrined in the Constitution; however, states are free to define tax rates, payment criteria, rules, etc.

How does ICMS work?

Consumers already pay ICMS indirectly, but almost all companies are subject to this tax and must collect it directly. 

In short, it is charged when there is a Issuance of an invoice: in any transaction involving the sale of goods or the provision of services not subject to the Tax on Services of Any Nature.  

Let's say you manufacture bags to sell; when you buy the raw materials, you will pay ICMS (a Brazilian sales tax).

If you buy the bags directly from the factory to resell them, this tax will also apply.

When you sell batches of this merchandise to your customers, this tax will also be applied when the invoice is generated.

It serves as evidence, as it indicates that the merchandise of one company has passed into the ownership of another, or to an individual.

So, you see how easy it is to understand. What is ICMS? 

Who pays the ICMS tax?

In practice, everyone pays this tax, even if indirectly, as has already been reported. 

However, directly, virtually every company must pay ICMS (a Brazilian state tax). This tax applies to all sales, imports, services, and transportation; therefore, any company that performs these activities, or any of them, must pay the tax.

In the case of services, few are subject to ICMS (State VAT), because a large portion are subject to ISS (Municipal Service Tax).

There are three types of ICMS (Brazilian state sales tax), and the main point to note is that in many situations, the responsibility for paying the tax can be transferred.

For example, for a MEI (Individual Microentrepreneur), whose occupation is subject to the tax, it is collected directly from the DAS (Simplified Tax Collection Document).  

There are also those that receive exemptions or are immune from the tax. To check the lists of tax-exempt operations, see the... Complementary Law No..

It is also worth noting that the tax is levied in the state of origin of the product or service, regardless of where the buyer is located. 

ICMS: What is it and why is it important?

ICMS is the main source of revenue for states and municipalities. Similarly, it serves to maintain their positive revenues. 

In many situations, it is common for municipalities to use part of the revenue collected to invest in services that improve the quality of life for the population.

With the portion that the state transfers to the municipalities to integrate into the budget, they use it for social projects, renovations, education, security, and health. 

Therefore, part of the capital raised ends up returning in benefits to the payer. 

How did you find out? ICMS: What is it? You know it's a mandatory tax for your business. So, always keep your company's finances up-to-date and organized. 

To help you with this process and to separate your personal and business income, you can use a business account.

In fact, there are currently some great free options on the market. Learn about some of them below! 

1. C6 Companies

C6 Bank offers a complete business account that is free of fees, meaning it has no opening or maintenance fees. 

In addition, the customer has access to up to 100 TEDs (bank transfers) and 100 deposits via bank slip per month. Pix (Brazilian instant payment system) and withdrawals are also free.

Certainly, it's an interesting alternative for those who want to manage their business finances without sacrificing cost savings.

The account also has a multi-function card, the C6 Business. It has no annual fee and you can choose from 12 available colors the one that best suits your company's image.

C6 Empresas also offers other services that can help you boost your business, such as loans, which can be used as working capital.

To open a business account, access the C6 Bank account app and click on “Open account”. 

2. Cora

The Cora digital account is designed for business owners and entrepreneurs. It has no monthly fees or account opening fees. 

In addition, it offers free and unlimited payment slips and transfers, billing management, and debit and credit cards.

It's important to highlight that MEIs (Individual Microentrepreneurs) can use the account and its services for free, but Cora does not approve credit cards for this group. Understand the reason better. 

Aside from that situation, Cora is one of the best options on the market when it comes to affordability. 

To become a client, in addition to having an active CNPJ (Brazilian company tax ID), you must download the app and register to see if you will be approved.

3. PicPay for Business

PicPay has a unique feature: it allows you to open a business account without having a CNPJ (Brazilian tax ID), but it differs from the account for those who do have a CNPJ. 

However, it also offers many advantages, and some of the services are the same. 

For those without a CNPJ (Brazilian business tax ID), the PicPay Pro account is available. It doesn't charge any joining fees, rental fees, or monthly fees. 

You can sell for cash or in installments up to 12 times and receive payments instantly.

If you are already a customer, simply activate the Pro Account In the PicPay app. If you're not already a customer, download the PicPay app and open your account. 

For entrepreneurs with an active CNPJ (Brazilian business tax ID), opening a PicPay Empresas account is ideal. 

It's also free, but it offers more services and advantages. One of them is that you can choose when to receive payment and how much to pay in fees per sale.

Furthermore, you can track all sales via your mobile phone or computer and have more control over your business. 

Visit the website PicPay.com/empresas and register. 

4. Inter Business Digital Account

The business account offered by Inter is comprehensive, ideal for those who already have a well-structured business and need more management services. 

Among the services and advantages it offers, we can highlight, for example:

• Free and unlimited Pix payments;
• 100 wire transfers and 100 payment slips per month;
• Payment slips and deposit slips;
• Bank account transfer;
• Investments;
• Access management and approvals;
• Credit card with no annual fee;
• Advance payment of credit card receivables;
• Card machine.

If your company is a MEI (Individual Microentrepreneur), Inter has an exclusive digital account for this audience. It's also free and offers many advantages for its clients.

A business account can be opened. initiated by the websiteWhile the MEI account can be requested through the Super App of the PF account.

5. PagBank

PagSeguro also has a free online business account (PJ) at PagBank. One of its distinguishing features is the interest earned on the balance, based on the CDI rate. 

In other words, besides helping you organize your company's finances, it also helps you increase your profit.

In addition to that, the PagBank business account also offers:

• Free and unlimited TEDs and PIX transfers;
• Card with no annual fee;
• Issuing payment slips via the app;
• Business management;
• Machines;
• Credit for the business;
• Account card;
• Investment platform.

To access these and other services for your business, download the app and open your account. 

6. Nubank Business Account

At Nubank, you can get a personalized credit card with your company's name, subject to credit approval. 

One of the distinguishing features of this fintech company is its service. Purple PagesIt helps you to give your business more visibility.

It functions as a platform for entrepreneurs and brings together service providers from different segments in one place.

See below for other advantages of the Nubank business account:

• Free account;
• Free and unlimited Pix payments;
• Payment assistant;
• Debit card for managing the balance;
• NuTap;
• Humane service.

Account opening must be initiated through the Nubank website, but after approval, the customer must download the app to complete the process. 

Conclusion

In this text: ICMS: what is it and how is this tax collected?You learned more details about the tax that is already part of our daily lives. 

In addition, we found some alternative business account options that can help you manage your business finances: payments, receipts, collections, issuing invoices, working capital, and much more.

Be sure to explore and compare each of them to decide which is the best option for your company.