Welcome to this eBook about the SAP Country Version Brazil, Logistics and

Financials.

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After completing this lesson, you will be able to:

§  Discuss general topics about SAP in Brazil

§  Explain key Brazilian localization featuress in SAP ERP

First, we will give a brief overview of SAP in Brazil.
Next, we will introduce some important localization topics with regard to logistics and
financials processes. These topics include, for example, the nota fiscal, specific
Brazilian processes in SAP ERP, taxes and tax calculation procedures, and legal and
fiscal reporting.

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Let’s take a look into SAP in Brazil !

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The SAP Globalization Services team working on Brazilian topics comprises of
development and localization product management at several locations.
Roughly two-thirds of the developers working on Brazilian localization topics
are located at SAP Labs in Sao Leopoldo, Brazil. The remaining developers
are located mainly in Germany and India.
The development team is supported by localization product managers located
in São Paulo, Brazil, and Germany.
SAP continues to invest in Brazil. In fact the development team dedicated to
Brazilian topics increased considerably during the last five years.

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Before we start: Our complexity ranking for this Country Version is „high
complexity“ with a frequency of Legal Changes considered as „very dynamic“,
while the interpretation of Law Text is also very difficult. This means the
implementation is not that easy and you must be prepared for frequent legal
changes during the ongoing maintenance. Please check out the addendum,
too, since this ranking can be subject to change (see country page Brazil on
the SAP Service Marketplace).

The official language is Portuguese and our experience shows that most of the
users accept only this language.

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The following sections will give you an insight into specific Brazilian topics, including:
§  Brazilian fiscal documents like nota fiscal and some more
§  Brazilian processes in SAP ERP
§  Tax calculation
§  Legal and fiscal reporting

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In Brazil, tax-paying companies must issue notas fiscais for almost all business
processes. This includes processes involving business partners, companies
belonging to the same group, and branches belonging to the same company.
In Brazil, each branch of one company (in Portuguese, called filial) is a juridical
person. It is registered at one or more tax authorities and has tax registration numbers
different from the ones of the company to which it belongs. Each branch sends and
receives notas fiscais and must keep fiscal books and submit tax declarations.

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The nota fiscal is the Brazilian invoice. It is required when moving goods from one
location to another, among different companies or branches of the same company.
Additionally a nota fiscal is required also in transactions without goods movements,
for example, when providing services or issuing debit memos. The nota fiscal
contains much more information than the usual invoices required in most countries; it
includes logistic, financial, and fiscal data.
The nota fiscal contains all tax information. It is the basis for submitting tax
declarations.
The nota fiscal (NF-e or Paper) has specific printing requirements regarding
the layout and sequential numbering. In case of NF-e specific layout
requirements also exist for the XML file.
In 2010, the electronic nota fiscal (NF-e) became mandatory for almost all companies.

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This slide shows the electronic nota fiscal (NF-e) process.
The vendor receives a purchase order, prepares the goods, and sends an electronic
nota fiscal in XML format to the SEFAZ office in his or her region. The SEFAZ office
performs some checks on the data and, if all data is correct, sends an authorization
key and a receipt to the vendor.
Now the vendor can print the DANFE and ship it, with the goods, to the purchaser.
Once the purchaser receives the goods and the DANFE, the purchaser checks
that the NFE is authorised at SEFAZ, and can download the XML from SEFAZ
website in order to automate the data entry into the system. At the end of the
period the data is sent to SEFAZ, which then cross-checks the data send by
the vendor with the data sent by the purchaser.

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A DANFE is a printed document issued together with the electronic nota fiscal.
Even if a company issues electronic notas fiscais, a DANFE still needs to be printed.
The DANFE has to accompany all goods movements among companies or branches.
The DANFE, however, cannot take the place of the nota fiscal because the DANFE is
not legally valid without the nota fiscal XML file.

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A Conhecimento or freight invoice
§  Is a fiscal document issued by the carrier in relation to transportation services.
§  It has to accompany the goods movements between companies or branches.
§  Before 2013, the paper format was allowed, but the electronic format is mandatory
as of December 2013. The electronic format is known as CT-e and has a totally
different XML layout than NF-e.
§  For CT-e, a DACTE (Auxiliary Document of Electronic Freight Invoice) is printed.
§  It contains information on the freight and taxes on freight.
§  The notas fiscais that make up the delivery are referred to in the freight invoice.
§  Freight invoices must be included in legal reporting.

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SAP GRC Nota Fiscal Electronica, in short SAP NFe, is an SAP product which
supports companies in complying with the Brazilian requirements on electronic

invoicing.

With SAP Nfe Brazilian companies can manage:

•  Electronic invoice documents (NF-e)

•  Electronic freight invoices (CT-e)

•  and MDF – Electronic Fiscal Document Manifest

SAP NFe helps SAP customers in Brazil managing electronic documents for
outbound and inbound processes.

Two different licenses are available.

With the outbound license you manage electronic documents related to the sales
process. The required data is received from ERP, transformed into an XML file and
send to the tax authorities to get the authorization.

With the inbound license you manage electronic documents related to the purchase
process. The XML file sent by the vendor is received in the GRC system, some
validations are performed and the data is transferred to the SAP ERP system, where
goods receipt and invoice receipt are posted automatically.

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This slide gives an overview on the main features of the SAP NFe 10.0.
The features in bold characters are the recently most important:
•  Receiver’s acknowledgment (Manifestação do Destinatário in Portuguese);
•  New layouts for the nota fiscal, freight invoice and MDF-e.

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In the standard process, a nota fiscal is issued during the billing activities.
In the standard purchasing process, a nota fiscal is posted at the time of goods
receipt. It is also possible to have a nota fiscal at the time of invoice verification.
A nota fiscal is required also when transferring stock between two different branches
of the same company.
In some cases you must issue a nota fiscal without any reference to existing SAP
ERP documents.
Brazilian legislation influences the business process by imposing a series of
obligations with which companies must comply.
In fact, each business process is categorized by an official code called the CFOP
code. This categorization has to be documented in the SAP ERP system and in the
nota fiscal.
Some business processes in Brazil are very different from their international
equivalents, such as the consignment process. For other processes, such as future
delivery, there is no equivalent outside Brazil.
Most Brazilian processes require nota fiscais.
For these different cases you need some additional document types in sales and
additional movement types in materials management.
Overall, Brazilian localization is very complex because it requires many customizing
activities. Sometimes, modification of standard processes can have an impact on
global templates.

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In Brazil, there is no classical VAT; instead, there are several other taxes levied by
different tax authorities on federal, state, and municipal level.
Additionally, there are also a lot of contributions for social and other purposes and
some withheld taxes, especially income taxes, which also have to be paid to the
government.

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The IPI tax is a federal tax on industrialized products. The IPI amount is generally not
included in the tax base amount, but there are other taxes which are part of the
IPI tax base amount.
This tax applies when selling products and it is normally due when the products
leave the company.
The tax is usually levied as a percentage, but in some cases - such as beverages or
tobacco - it is calculated as a fixed price per unit. In this case it is called IPI Pauta.
If the manufactured products are sold to final consumers, or as fixed assets, then
the IPI amount is included in the IPI tax base amount.
Only manufacturing or equivalent companies may take IPI credit on purchase of
materials for usage in production. It is possible to take 50% IPI credit even if the nota
fiscal does not contain IPI.

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The ICMS is a state tax on goods movements and services. It is similar to a state VAT.
It is due when the goods leave the company.
The ICMS rate depends on the state of the seller and the state of the buyer. When
buying goods from another state, the buyer has to apply the difference between the
ICMS rate in the buyer’s own state and the ICMS rate in the other state to the local
ICMS rate. This is similar to the EU acquisition tax.
When selling goods to a tax-free zone, the seller gets a 100% discount on the tax
amount. When selling goods for consumption or assets, the ICMS is calculated on top
of the IPI amount.

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ICMS tax substitution applies when the vendor is in charge of calculating and paying
the ICMS due by the customer.
The process works like this: The ICMS on the sale is calculated, and then the ICMS
on the deemed resale price, including surcharge, is calculated. The difference
between the two amounts is the ICMS with substitution.
Many variations exist, involving fixed prices or minimum prices.
Interstate sales with ICMS ST need to consider the intrastate rate of the destination
rate.
ST may also apply to PIS and COFINS.

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ISS is a municipal service tax that applies to all services except the ones ruled by
state law, for example, telecommunication services.
ISS applies to most types of services, except those governed by state law (where
ICMS applies).
It can be collected by the service provider or by the service recipient. In case
municipal law requires collection by service recipient, then this is done via withholding
tax.
Although not foreseen by law, in some cases where 2
municipalities are involved double taxation can occur
(normal ISS collected by the service provider, and also
withholding ISS collected by the service recipient).
The ISS rate depends on the type of service. Each municipality issues a list of
services with applicable tax rates.

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PIS, COFINS, and other contributions are collected by the government to fund social
programs.
PIS and COFINS used to be non-deductible and were therefore not treated as tax, but
as an additional cost element (surcharge).
They are usually part of the base amount together with ICMS and other taxes. The
way they are calculated depends on the use case.
They can also be treated as withholding taxes.

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Withholding taxes are levied in Brazil in several scenarios and are the most complex
in the world. Withholding taxes can be due at the time of invoicing or at the time of
payment, they depend on the type of business partner and on the nature of products
sold or service provided.
Some taxes are always withheld, such as income tax (IRRF) and social security
(INSS). In other cases, taxes are withheld only under certain circumstances, or they
are collected by the vendor.
The calculation of withholding taxes can involve accumulation and thresholds.
Withholding taxes are reported in a federal tax report called DIRF. This contains
information from the SAP logistic processes and human capital management (for
Brazil).
Certain withholding taxes may have to be reported jointly (with summarized tax rate)
or separately.

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As of 2010, large enterprises are required to present financial statements according to
the IFRS accounting principles. In parallel, they need to present financial statements
according to the Brazilian GAAP. For small and medium enterprises, the transition to
IFRS will take place in phases.
Brazil has no official chart of accounts, but has widely used common practices,
especially with respect to treatment of tax postings.
In Brazil, revenues are generally posted including taxes. The tax amount is then
posted on the tax account and on an offsetting account, so as not to duplicate the
taxes that are already included in the revenues.
Coming to revenue recognition we observe a discrepancy between IFRS and the
Brazilian fiscal law. In fact according to IFRS revenues can be posted after goods
issue, while according to Brazilian tax legislation taxes are due when the nota fiscal is
issued irrespective of the goods delivery.

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Brazilian asset accounting is characterized by its own valuation and depreciation
rules. All transactions involving acquisition, sales, transfer, or leasing of assets require
notas fiscais. This tax calculation is similar to the one for consumption goods.
Some taxes paid on asset acquisition - specifically ICMS - can be credited on a
monthly basis over a period of four years. This means that the corresponding tax
amounts have to be credited over 48 months, calculated from the day of the
transaction. This applies only to assets used in production processes.
All taxes paid on asset acquisition (ICMS, PIS, and COFINS) have to be reported in a
special report called CIAP. SAP supports the CIAP report only in its simplest cases
and cannot handle assets under construction or integration with the Investment
Management application in SAP ERP.

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Brazilian companies need to determine the real profit for income tax purposes. For
this reason, they need to apply actual costing.

Manufacturing companies are required to use the material ledger to roll up all
differences between planned and actual costs to determine the value of work in
process, inventory, and cost of goods sold. For this, use of the material ledger is
mandatory in ERP.

Similarly, companies in the service industry must use wages and other HR information
to valuate the actual cost of projects and services at period end.

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If we look at the Brazilian payment instruments, we observe that more than 80% of
the overall payment value is handled through credit transfer. Beside the standard
credit transfer instrument DOC, also a very modern instrument with real-time credit
transfer, called TED, is widely used.
Almost 15% of the total amount of payments is handled through checks, which are
still widely used.
Looking at the collection instruments, the most widely used is the Boleto. Boletos
contain the complete information for the payment and can be paid at any bank until
the due date. Paper Boletos are still used in B2C transactions, while companies have
switched almost completely to electronic Boletos.
DDA, whose English translation is direct debit authorized, is a special process
involving electronic Boletos. Here the customer’s house bank receives the payment
request and settles the invoice only upon authorization from the payer. The complete
process is electronic and doesn’t involve printed documents.

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Brazilian reporting comprises statutory and tax reports that have to be submitted to
the municipal, state, or federal authorities. Especially regarding tax reports, there are
many local variations and layouts for each non-federal declaration, depending on the
city or the state to which the report must be submitted.
There is a general trend to substitute paper-based reports with electronic ones.
Moreover, there is a trend to harmonize local reports on a national level. However,
experience shows that with each legal change, the complexity increases instead of
decreases.

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Some of the most common paper-based reports are listed here.
These are accounting reports, like the journal and the GL account statement.
Some federal tax reports, such as the declaration of withholding taxes (DIRF), are
provided by SAP.
Local tax report forms at state and municipal level are called Modelos. These
comprise, for example, a list of incoming and outgoing documents, an overview of
production and inventory, summary reports for IPI and ICMS taxes, and so on.

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SPED means Public System of Electronic Bookkeeping. The goal of the SPED
initiative is to harmonize the many reports required in Brazil and replace paper-based
reports with electronic ones. As of now, some paper-based reports are still available.
The first SPED report to be developed by SAP was the SPED Contábil (or SPED
ECD) report. The SPED ECD file contains accounting data that was, in the past,
reported in several different forms. This includes balance sheet, income statement,
journal, and account balances.
Another important SPED report is the EFD report, which contains data for tax
purposes. It lists all notas fiscais for the reporting period, together with production,
inventory, and goods movement information. It also contains some mechanisms to
check the correctness of the reporting tax credit and liability.
The third report in the slide, the EFD Contributions report is used to submit
information about the PIS and COFINS payments.
These 3 SPED reports are delivered in SAP ERP, but in some cases it is necessary to
use BADIs to fill in some report sections.

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Fiscal compliance is the biggest challenge for Brazilian companies, who are subject to
a huge number of fiscal obligations. Brazilian companies in fact must submit many
federal, state or even municipal reports on monthly or annual base.
On the other side, with introduction of SPED (electronic bookkeeping) and NF-e
(electronic invoicing) the Brazilian tax authority has full transparency about the
compliance of the tax payers.
In order to respond to the grown customers’ needs with regard to reporting obligations
and fiscal compliance, SAP has developed the Tax Management Framework. This is a
new platform for tax management and comprises SAP products as well as partner
products.
The Tax Management Framework is the whole set of systems. The central piece of it
is the new SAP product SAP Tax Declaration Framework for Brazil 1.0.

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The Tax Declaration Framework (SAP TDF for Brazil 1.0) is a native HANA
application.
The complete data model is in HANA and it is called Central Tax Repository, in short
CTR.
With CTR, all fiscal data from different source systems can be consolidated in one
unique place.
CTR is a set of tables and views which bring the data in a structure similar to the
SPED layouts.
The CTR is consumed by TDF and partner applications and can be used to build
customer-specific applications taking advantage of the HANA speed.

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In this slide we will have a look at the components of SAP TDF for Brazil 1.0.
§  SPED ECD and SPED EFD in the TDF are new HANA-native reports, where all
intelligence is in HANA. Improved CIAP solution is also part of the TDF license.
§  Tax obligations follow-up and storage is a service which controls the status of each
obligation generated both by TDF or partner software. Also, the files generated by
some applications can be stored securely.
§  With Fiscal period control it is possible to decouple the financial closing from the
fiscal closing.
§  Fiscal document correction module helps the user to analyze errors and correct
them in the proper source system.
§  Process logging offers a logging service which can be used for analysis and
auditing purposes.
§  TDF-S consists of web services which enable the partner software integration.

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You should now be able to:
§  Discuss general topics about SAP in Brazil
§  Explain key Brazilian localization topics for SAP ERP
For more information on the topics discussed in this lesson, see the references listed
here.
Thank you very much! If you have questions, please contact us at
globalization@sap.com

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