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Tax on cosmetics and imported items is expected to rise in 2015

In order to confront the economic crisis and rebalance public accounts, the Brazilian government is studying the possibility to increase taxes on cosmetics and imported items in 2015. From January to October 2014, Brazil recorded a deficit of R$ 11.5 billion. The measures are expected to yield R$ 5 billion to preserve areas such as education and health.

The high of the PIS/COFINS rate on imported products and increased taxation on cosmetics had already been discussed in March this year, but the economic team decided not to adjust taxes before president Dilma Rousseff’s reelection. At the time, industry representatives got together with Executive Secretary of the Ministry of Finance, Paulo Rogério Caffarelli, and presented a study on the possible consequences of increased taxation for the cosmetics market.

Details of the document were not disclosed, but members of ABIHPEC (Brazilian Association of the Cosmetic, Toiletry and Fragrance Industry) stressed that increased tax burden may threaten industry growth. It is estimated that the new measure will apply to cosmetic manufacturers, with the IPI tax on industrial goods being charged not only from companies involved in the industrial activity, but also in the distribution of cosmetics.

Because they are not considered as “essential products”, cosmetics such as hair color, perfumes and makeup items have an average of 25% VAT. In addition to taxes such as IPI, COFINS (Contribution for Social Security Financing) and PIS (Social Integration Program), the price can increase by up to 50% before it reaches consumers. For imported products, it is also necessary to add TEC (import duty), which further increases the end price.

© 2014 - Brazil Beauty News - www.brazilbeautynews.com

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