Tuesday, September 25, 2012

Special Reports



Brazil, here represented by the popular business office complex Naes Unidas in Sao Paulo, has one of
the highest corporate tax rates in Latin America. (Photo: Tatiana Sapateiro)
Highest Latin America Taxes: Brazil,
Argentina

Paraguay and Chile have the lowest rates.
BY LATINVEX STAFF
Brazil is among the four countries in Latin America with the highest corporate tax rates,
according to a Latinvex analysis of data for 20 nations from KPMG and the Heritage
Foundation.

Only two countries Argentina and Honduras have higher rates than Brazil. Meanwhile,
Venezuela has the same high rate as Brazil.
On the opposite end are countries like Paraguay and Chile.

Mexicos rate is around the average for Latin America.

BRAZIL
Brazils corporate tax rate of 34 percent is the third-highest in Latin America and compares with
a regional average of 29 percent.

Brazils corporate income tax (IRPJ) rate is 25 percent, which is a combination of a 15 percent
basic rate and a 10 percent surtax on income that exceeds BRL 240,000 (US$118,000) per
year, KMPG notes. In addition, Brazilian tax legislation imposes a social contribution on net
profits (CSLL) at a rate of 9 percent. Thus, corporate income taxation should be charged at a
combined rate of 34 percent (IRPJ and CSLL), KPMG says.

While Brazilian President Dilma Rousseff has announced plans to cut payroll taxes and taxes
on energy, there is no indication that corporate taxes will be cut anytime soon.
Venezuela also has a 34 percent rate. However, oil companies are generally subject to
corporate income tax at 50 percent, according to KMPG. This rate does not include municipal
business taxes which range from 0.3 percent to 9.4 percent of gross income, depending on the
district, and the business activity.
The Honduran overall income tax rate for corporations comprises of a 25 percent corporate
income tax rate and a temporary 10 percent solidarity surcharge that applies if the taxable
income exceeds HNL 1 million (US$51,000), KMPG says. In addition, there is a net assets tax
of 1 percent of the value of the assets of the company (less allowances for certain accounts and
accumulated tax depreciation). Net assets tax is payable only to the extent it exceeds the
corporate income tax, according to KPMG.
COLOMBIA
Colombia also ranks among the nations with the highest rates. Its rate of 33 percent is the fifth-
highest. However, the rate can be lower or higher depending on the location of a company.
Colombian companies and foreign branches qualifying as industrial users established in
Colombian Free Trade Zones are subject to a reduced corporate income tax rate of 15 percent,
as KPMG points out. In addition to the corporate income tax, there is a municipal industry and
commerce tax levied on industrial, commercial, and service activities carried out within a
municipality. The rate depends on the municipality and ranges between 4.14 and 13.8 per
thousand, according to KPMG.
Six countries all have a 30 percent corporate tax rate: Costa Rica, El Salvador, Haiti, Mexico,
Nicaragua and Peru.
The Dominican Republic previously had a rate of 25 percent, but passed legislation to increase
that to 29 percent for a two-year period starting in June 2011.

LOWEST RATES
Paraguay has a 10 percent rate, while Chile has a corporate tax rate of 18.5 percent.
Apart from these two, the countries with the lowest corporate tax rates in Latin America are
Ecuador (23 percent) and Uruguay, Panama and Bolivia (25 percent each).
In Ecuador, the rate can be reduced by 10 percent (to 15 percent) when the taxpayer decides to
reinvest its profits. This reinvestment needs to used for i) the acquisition of new machinery or
equipment or assets related to research and technology to improve productivity; ii) the
acquisition of fixed assets and all goods used for agricultural production, forestry, livestock and
flower-growing; iii) the grant of loans to the productive sector in the case of financial institutions,
according to KPMG. The companys capital must be increased by the reinvested amount.
OUTLOOK
In Mexico, the corporate tax rate of 30 percent is scheduled to be reduced to 29 percent in 2013
and to 28 percent from 2014 onwards.


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