Brazil
By far the largest and most populated country in South America, Brazil is a key player in terms of industry, especially so for agriculture. Having successfully weathered a period of global financial difficulty in the late 20th century, Brazil was seen as one of the world’s strongest emerging markets and a contributor to global growth.
More recently, after passing through the COVID-19 pandemic under President Jair Messaias Bosonaro (PSL party), Luiz Inácio Lula da Silva (Lula) of the PT workers party was sworn in as president (for the third time) on 1 January 2023 for a four-year term.
In terms of vehicle fleet, Brazil is home to more than 71 million light vehicles, the largest in Latin America.
Thank you to contributors to the Brazil WikiFleet page: BDO, Move.on, among others.
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Chapter 1: Economic and business environment
| Demographics | population 215 million (2022) |
|---|---|
| Capital | Brasilia |
| Major cities | Sao Paulo (population 12 million) |
| Languages | Portuguese |
| GDP | 2022 (Nominal) |
| Unemployment rate | 8.1% (November 2022) |
| Main industries | petroleum, steel, iron and chemical production, auto assembly, mining and processing of petroleum products, cement manufacture, agriculture, and tech industries |
| Currency | Brazilian real (BRL) |
| Interest rate | 13.75% (February, 2023) Source: Trading Economics |
| Fleet Maturity Index (scaling) | Approximately 76% of multinational companies in Brazil offer company's cars to some of their employees. As for 2021, overall vehicle production rose 11.6% year-over-year to 2.25 million units. Regarding automobiles and light commercial vehicles (LCV) in specific, production was up 8.7% to 2.07 million, says Anfavea. As for 2022, Anfavea estimates that overall vehicle production and sales will increase 9.4% |
| Political key info |
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| Inflation | 5.8% (January 2023) Source: Trading Economics |
Chapter 2 : Automotive market, segments & sales
| Total Car park | 2022
source: Fenabrave |
|---|---|
| New vehicle registrations (Cars, LCV, Trucks) | 2022
Source: Fenabrave |
| Top 5 brands (total market) | 2022 sales (automobiles and LCVs) 1. Fiat (430,202) source: Fenabrave |
| Model preference top 5 (total market) | 2022 passenger cars & LCVs* sold |
| Dealer network (including fleet dealer network) | While OEM-linked dealers are reliable for vehicle service and maintenance, the same cannot be said for third-party providers – at least not across the entire country. |
| Used car market/renewal cycle |
Source: Fenabrave
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Chapter 3: Company car market
| Total Fleet Park (company cars)/Fleet penetration in total fleet sales | 2021 |
|---|---|
| Evolution fleet sales (last 5 years) | Sales of LCV's in 2021 increased 24.2% to 416,473 units (source: Fenabrave) light and heavy commercial vehicle sales (source: OICA) Share of Direct Sales, cars & LCVs (source: Fenabrave) Meanwhile, hybrids and electric vehicles (EV) are slowly coming to the market but their high sticker price and the ethanol alternative in Brazil is hindering the growth of electrification. |
| Top 5 fleet brands (fleet market) | 2022 Direct Sales (LCV) |
| Fleet Model preference top 5 (fleet market) | 2022 LCV sales |
Chapter 4: Taxation & legislation
| Brazil | |||
| The basis of company car taxation in Brazil is reflected in this overview. Different types of taxes are considered here: taxes related to the registration of the vehicle, income taxes and VAT aspects. Expected future developments are also briefly listed, if any. We note that car taxation in Brazil is a very complex matter that cannot be summarized in a few pages. On average, it is estimated that approximately 48.2%-54.8% (for 2016) of the purchase price of a vehicle in Brazil is made up of embedded taxes (import duties, Federal VAT (PIS and COFINS), State VAT (ICMS), Federal Industrialization Tax (IPI), which have not always been covered in the below overview. | |||
| 1. Car taxation | |||
| 1.1. Registration tax | |||
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Taxable event
Taxable person
Tax due
Taxable period |
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| 1.2. Annual circulation tax | |||
| Taxable event
Taxable person
Tax due
Taxable period |
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| 2. Income taxes | |||
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Relevant Event
Person
Tax due
Period |
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| 3. VAT | |||
| 3.1. Deduction | |||
| ü Brazilian legislation has many peculiarities on this matter. Therefore, more analysis on this side is recommended (as it could vary according to the character of the purchaser). | |||
| 3.2. Hire purchase | |||
| Hire purchase is deemed as a regular car purchase. Therefore, a hire purchased should be treated as a regular purchase for tax purposes. | |||
| 3.3. Leasing | |||
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Lessor: As a general rule, PIS and COFINS contributions would be levied on gross-revenue at a combined rate of 9.25% or 3.65% for legal entities. There is a discussion if service tax (“ISS”) is due on leasing agreements, especially on financing leasing. Lessee: No taxation.
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| 4. Company car | |||
| 4.1. VAT due on private use of company cars | |||
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No taxation
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| 4.2. Company car in personal tax returns – benefit in kind | |||
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| 5. Income taxes – drivers’ personal taxation | |||
| 5.1. Private car in the personal tax return | |||
| 5.1.1. Private use | |||
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Taxable event
Taxable person
Tax due
Taxable period
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| 5.1.2. Commuter traffic | |||
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The commuter traffic is a benefit paid by the company that should be equivalent to the cost of public transportation. If the value paid exceeds the cost of public transportation, the difference must be considered as employee’s remuneration subject to taxation (labor taxation for employee and employer as well as income taxation for employee)
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| 5.1.3. Business kilometres | |||
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It should not be considered part of employee’s remuneration.
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| 6. Special schemes (if any) | |||
| 6.1. | |||
| ü In principle, there are special schemes applicable on the purchase made by specific legal entities, elderly people and special need people (disable). These special regimes generally provide for a reduction or exemption of certain taxes. | |||
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| 7. Electric vehicles | |||
| As a rule, it is treated as a regular vehicle. However, some exemptions in regards to Vehicle Property Tax - IPVA is available. | |||
| 8. Future developments | |||
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The government is developing a project to reduce taxes levied on electrical and hybrid vehicles.
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Source: BDO (2018)
Brazil levies 35% duties on imported cars and parts to encourage vehicle buyers to purchase locally-manufactured vehicles and replacement parts.
4.1. Car Taxation
For vehicles, Brazilian law requires a licence and registration fee, a property tax and an insurance, all annual and all payable by the individual or legal entity that owns the vehicle.
- The licence and registration fee, called Certificado de Registro e Licenciamento do Veiculo, is a pre-determined but annually variable amount, set by the relevant authority.
- The property tax, called Imposto sobre a Propriedade de Veiculos Automotores (IPVA), amounts to 4% of the listed price of the vehicle (as listed in the state of Sao Paulo), and applies to all vehicles not included in a special category.
- The compulsory insurance, called Seguro DPVAT, is variable.
Special schemes provide for reduced taxation if vehicles are purchased by elderly and/or disabled people and certain special categories of legal entities.
4.2. Income tax – Taxable persons
Car ownership (either by the driver or the legal entity) must be reported in the individual annual tax return.
VAT deductibility in Brazil is very complex, and could vary according to the nature of the purchaser.
It should be noted that hire purchase counts as regular purchase in Brazil, and consequently a car hire-purchased should be considered as a regularly purchased vehicle for tax purposes.
In the case of leasing, taxes for PIS (Programa de Integração Social) and COFINS (Contribuição para o Financiamento da Seguraridade Social) would be levied on gross-revenue at a combined rate of 9.25%, or 3.65% for legal entities. There is a discussion ongoing on whether ISS (Instituto Sobre Serviços) is due on leasing agreements, especially in the case of financing leasing.
The above applies to the lessor, the lessee is not taxed.
4.4. Income taxes – drivers’ personal taxation
For personal tax returns (of employees), the Brazilian government distinguishes between company cars solely used for work purposes, and those also used for private purposes.
In the first case, no extra taxes are due.
In the second case, if the car is used habitually for private purposes, its use is considered a fringe benefit, and subject to taxation (as income tax for the employee, and as labour tax for both employee and employer).
If the value of the benefit in kind exceeds the equivalent cost of public transportation, the difference is considered a remuneration subject to labour taxation (for both employer and employee) and income taxation (for the employee).
There is no specific provision for charging VAT for the personal use of company cars.
4.5. Electric vehicles
Currently treated as regular vehicles, however some exemptions with regard to IPVA (i.e. vehicle property tax) may be available. See also 4.6.
The Brazilian government is developing a system to reduce taxes on certain categories of cars with alternative powertrains, notably electric and hybrid vehicles.
Chapter 5: Car policies
In recent years, corporate car use has been on the rise in Brazil, and they entail vehicles for operational and benefit fleets. For operational fleets, cars are for business operations only and they are commonly issued to employees of public utilities such as energy and telephone companies.
Regarding benefit fleets, these vehicles are used for both personal and business purposes and are mainly issued to directors, managers, and sales people. As a differentiation to attract workers, employees are sometimes given the right to buy their car at a discounted price at the end of the leasing period.
Some of the more common industries with company cars as a benefit are pharmaceutical, food and beverages, banking, consultancy, and others. Besides getting better pricing due to economies of scale, outsourcing a fleet can bring operational benefits as companies can focus more on their core business.
What is a good car fleet policy?
A good car fleet policy is one that clearly defines the obligations and responsibilities of the employee and employer, and one that addresses all the legal and social risks related to the usage of the car. Misunderstandings between the driver and the company must kept to a minimum.
The policy must address several things, among them being CO2 emission, TCO conditions, fuel and accident management, parking tolls, insurance conditions, maintenance and service, traffic fines, penalties for bad driving, prizes for good driving, and the possibility of buying the car at the end of contract.
Source: Move.on
