2023-07-15 14:00:05
Companies have chosen to modify the tax classification of their products to reduce taxes.
This is the case of Sonho de Valsa, which ceased to be classified as a “bonbon” and became a “wafer biscuit”. In this way, the manufacturer Mondelēz started to pay less taxes.
When Sonho de Valsa was considered a chocolate product, Mondelēz had to pay 3.25% Tax on Industrialized Products (IPI). Until 2022, the rate was even higher, at 5%. By transforming it into a wafer – and therefore into a bakery item – the American multinational no longer needs to pay the IPI.
A change like this is not illegal, as long as the composition of the product allows it. The tax framework takes into account the characteristics of the goods, such as composition and functionality.
In a note to Estadão, Mondelēz stated that the product’s framework was made “based on technical parameters duly grounded” in the resolution of the National Health Surveillance Agency (Anvisa).
Mondelēz is not the only company that changed the tax classification of its product and, consequently, managed to reduce the taxes paid. McDonald’s, for example, stopped advertising that it sells “ice cream” on its storefronts and replaced the word with “dessert”.
With the change, the company classified ice creams in the “dairy drink” category, benefiting from a zero rate of the Social Integration Program (PIS) / Contribution for the Financing of Social Security (Cofins) . The normal rate for ice cream would be 3.65% or 9.25%, depending on the company’s tax regime.
According to the company, the recipe for its frozen desserts has been maintained “for more than ten years”, and the product has been classified and taxed as a dairy drink since 2015. “The chain strictly follows the tax legislation in force in the country”, he said in note to Estadão.
In the perfume sector, the confusion resulting from tax framework is old. The Mercosur Common Nomenclature (NCM), a system adopted in the region that classifies commercialized products, establishes a code for perfumes and another for cologne, but does not define the fragrance concentration in each one.
There is also no tax legislation that objectively specifies this difference – although the rates for each product are quite different. Until 2022, the IPI rate for perfumes was 42%, while that for cologne was 12%. After a decree, signed in 2022, these numbers dropped to 27.3% and 7.8%, respectively.
tax reclassification
Tax reclassification reveals the complexity of the current Brazilian tax system. Today, depending on the classification of the product in a certain category, it may receive a different tax treatment or have a reduced rate. If done well, tax reform can reduce these differences in treatment.
“The main cause of conflicts ends up arising from the fact that there are a plurality of different tax treatments, such as tax benefits, or even different rates, all based on the classification of the product”, says the lawyer partner of the Machado Associados office, Gabriel Caldiron Rezende . “This can inevitably result in conflicts over gray areas of legislation and possible interpretations,” he adds.
Larissa Luzia Longo, researcher at Insper’s taxation core, points out that there are many similar products between categories, which ends up generating these cases that allow for different classifications.
“And, as each classification has a different taxation, it is natural that the taxpayer seeks to classify himself in the category that makes him pay less tax, just as it is also natural that the Tax Authorities seek to classify the product in a way that can collect more.”
Litigation reduction
Although the tax reform fails to unify IPI, PIS/Cofins, Tax on Circulation of Goods and Services (ICMS) and Tax on Services (ISS) into a single Value Added Tax (IVA), as initially intended, the trend is that it reduces the complexity arising from the fiscal framework, according to specialists.
With the reform, the country must have a dual VAT, that is, the Union will separately collect its share in taxation – unifying PIS/Cofins and IPI – and the States and municipalities, theirs – unifying Tax on the Circulation of Goods and Services (ICMS) and Services Tax (ISS). The rate should also not be unique, but special treatments should occur in fewer cases than currently available.
“One of the main aspects of the tax reform, in addition to reducing the number of taxes on consumption, is to standardize rates or reduce exceptions as much as possible. If the tax reform is approved with this guideline, one can expect the mitigation of disputes over the tax framework of products. Taxation would be the same for all products, making it neutral”, concludes Rezende.
With information from Estadão
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