Do you know what ISS is? CNAE? RPS? CSLL? In the busy day-to-day life of agencies, it is easy to get lost amid so many terms related to issuing invoices.
To help you clarify this, we have created this glossary with terms that will help you better understand everything behind issuing the electronic invoices for services, NFS-e.
Let's get to know the terms:
➤ ISS (Brazilian Tax on Services): It was regulated by supplementary law 116/2003, which provides for the Tax on Services of Any Nature. It is intended for municipalities and the Federal District, that is, its rules and rates vary according to the city, usually between 2% and 5%. All service providers that fall under this law must collect the ISS and this includes advertising agencies. The amount of this tax is for the municipality where the service was provided.
- Companies opting for Simples Nacional pay the ISS along with other taxes through DAS (Document for the Collection of Simples Nacional). The rate is unique and calculated based on gross revenues. In cases where the tax is withheld at source, the policyholder (i.e. the agency's client) is responsible for the payment.
- Larger companies (presumed profit and real profit) pay the ISS for each service provided according to the rate of the city in which the service was provided and according to their area of operation. If the ISS has to be withheld, the agency's client will have the tax amount discounted from the amount of the work and the agency must declare the amount withheld.
➤ Item Service List (LC 116/2003): Complementary Law 116 of 2003, which regulates the Tax on Services of Any Nature (ISSQN), contains the list of services that are taxed and their respective codes. The code most used by our clients is 17.06 - Advertising and publicity, including sales promotion, planning of campaigns or advertising systems, development of drawings, texts and other advertising materials.
➤ CNAE (National Classification of Economic Activities): it is a code that aims to categorize companies, public institutions, non-profit organizations and even freelancers in a standardized way. It delimits the segment of the company and what operations it can perform, in addition to being used in the registers and federal, state and municipal administration records. A company can have one or more CNAEs.
The difference between the Service Code and CNAE: CNAE is responsible for classifying a company's line of activity and framing — which will imply its model and even define whether it can opt for Simples Nacional. The Service Code, on the other hand, defines the type of service provided by a company and the tax rate that will be used as the basis for calculating the municipal tax when issuing an invoice.
➤ Municipal Taxation Code: code provided by some municipalities for the service provider to use when issuing an invoice. It can be just one code or several.
➤ Simples Nacional: it is a tax regime for micro and small companies that earn up to BRL 4.8 million per year. The biggest advantage of it is the collection of several federal, state and municipal taxes in a single guide. The rate varies according to the company's annual revenue. Not every company can be part of Simples Nacional, and the consultation is often made through its CNAE. Despite the advantages, it is necessary to keep an eye on it because as the amounts are calculated on the billing and not on the net revenue, the agency may have losses and still have to pay taxes, because it does not discount expenses.
DAS (Document for the Collection of Simples Nacional): it is the document that unifies the taxes to be paid by the company. The payment amount is received by Banco do Brasil system, which automatically allocates the amounts relevant to municipalities, states and the Federal government.
Lucro Real (Actual Profit): companies that earn more than BRL 78 million a year, have profits or income abroad or that develop financing activities are obliged to adopt this tax regime, which does not prevent other companies from also choosing it. Taxation in this regime is calculated on the net profit for the period, the same used for the calculation of IRPJ (Corporate Income Tax) and CSLL (Social Contribution on Net Profits). In this way, the amount of the tax may increase or decrease and there is no taxation in case of loss in the company.
➤ Lucro Presumido (Presumed Profit): companies that are not included in the mandatory aspects of Actual Profit and whose revenue has been equal to or less than BRL 78 million can opt for this regime. The determination of the IRPJ and CLSS calculation basis is simpler in the presumed profit, as it is fixed by the legislation and focuses on an estimated profit that varies according to the company's line of business. This presumption of profit varies between 1.6% and 32%.
➤ PIS (Social Integration Program): it is a contribution that finances the payment of benefits to CLT workers, such as unemployment insurance and allowances. It is a federal tax calculated based on the tax system of the invoice issuer.
➤ COFINS (Contribution for Social Security Financing): a federal contribution that focuses on the gross revenue of companies with the objective of financing public health, social assistance and social security. The rate of this tax varies according to the company's revenue.
- PIS and COFINS must be collected whenever a company earns revenue during the month. Payment must be made by the 25th of the month following the issuance of the invoice by companies that opt for actual or presumed profit.
- In accordance with the law, the retention of PIS, COFINS, CSLL and IRPJ must occur when the value of the invoice is greater than BRL 215.05.
- Presumed Profit Rates: PIS: 0.65% and COFINS: 3%
- Actual Profit Rates: PIS: 1.65% and COFINS: 7.6%
- The payment must be made through the DARF (Document for the Collection of Federal Revenues).
➤ RPS (Provisional Service Receipt): as its name says, it is a provisional document generated before an invoice is issued. It is widely used when the agency needs to issue an invoice and fails to do so due to system or internet failure, for example. It can be sent to the client in emergency situations, containing all information about the services provided. There is usually a deadline for the RPS to be turned into an invoice, which is around 5 working days after its issue. Most municipalities that issue electronic invoices via integration or web service, as it is the case with iClips, require that data be transmitted through RPS. And then, when the invoice is sent, the city hall converts the RPS into NFS-e.
➤ Batch: invoices can be sent in batches, that is, several RPS together that will generate an electronic invoice for each one. The batch is received and placed in a processing queue, therefore when issuing an invoice on iClips, it can be placed in the “pending” tab first. After a few minutes, you can reprocess the invoice and the result will be sent invoice or possible errors in the batch, which can be corrected and the invoice resent.
➤ Serial: for invoices issued through web services, the serial is usually E. But in some municipalities, it can also be a number. Consult your accountant to see which serial is suitable for issuing NFS-e at your agency.
➤Revenue Tax Withheld at the Source (IRRF): the IRRF levied on the provision of advertising and publicity services is calculated at a rate of 1.5%. The amounts transferred to the vehicles, that is, that are not effectively left to the agency, do not enter the tax calculation basis.
➤ IR (Corporate Income Tax): it is calculated according to the profit base, which can be Actual Profit or Presumed Profit.
➤ Tax withholding: a rule created to avoid tax evasion. Withholding determines that the policyholder, that is, the service contractor, pays the tax in advance, thereby changing the liability for payment. Not all companies need to do this withholding, as it is linked to the activity performed and the tax regime in which it is inserted.
- Companies opting for Simples Nacional are exempt from withholding taxes, as all taxes are collected through DAS, usually after the monthly closing.
- ISS withholding may be required in advance even for companies opting for Simples Nacional, but only in cases where municipal legislation determines so.
- The IRRF levied on advertising and publicity services is always collected by the agencies.
➤ Special Taxation Regime: identification code of the special taxation regime. It may be:
➢ Municipal microenterprise;
➢ Society of professionals;
➢ Simples National;
➢ Taxation by variable revenue.
➤ Nature of the transaction: ISS liability code valid for the municipality issuing the NFS-e according to the type of taxation. It can be:
01 - Taxation in the municipality;
02 - Taxation outside the municipality;
03 - Exemption;
04 - Immune;
05 - Requirement suspended by a court decision;
06 - Requirement suspended by the administrative procedure.
iClips helps you issue invoices easily through the system in several cities in Brazil, but always remember to consult your accountant to assist you with the different laws and forms of taxation according to your area of operation and municipality in which your agency is found.
Still needs help? Just send us a word at firstname.lastname@example.org or on the platform chat and we will help you out!