ICMS Tax Substitution (Substituição Tributária)
Definition
Tax substitution in Brazil. Country Version Brazil calculates one form of substituição tributária, for ICMS. The system refers to it as substituição tributária, SubTrib, or ST.Use
Tax substitution is a method of collecting taxes for products that typically have few producers, but many customers (alcoholic beverages, for example). It simplifies tax collection since the tax authorities process a much-reduced volume of ICMS payments. It works in the following way:
A producer manufactures its product and sells it to a reseller, who in turn sells it to the final customer. Instead of both the producer and the reseller submitting ICMS payments to the tax authorities, the tax authorities transfer the right to collect taxes to the producer of the goods. The producer, called the substitute taxpayer (substituto tributário), is obligated to submit ICMS tax to the tax authorities, including the tax incurred when it sells to the reseller and the tax on the presumed resale surcharge that it collects from the reseller.
The system calculates the surcharge for the product by applying a percentage rate or a fixed price per unit.
Rate Determination in Materials Management (MM) and Sales and Distribution (SD)
When you enter a purchase order in MM or a sales order in SD, the system derives the SubTrib rate from the same information it checks for
ICMS rate determination, only it checks for SubTrib instead:In SD, if the customer's tax classification is
The system searches for the rate as described
If the system does not find a SubTrib rate, it does not calculate SubTrib. There is no default rate, as there is for IPI, ICMS and ISS.
You can group customers according to what rules they use for calculating SubTrib and then specify the customer group in customer master records. You define the customer groups in Customizing for Financial Accounting, under Financial Accounting Global Settings
® Tax on Sales/Purchases ® Basic Settings ® Settings for Tax on Sales/Purchases in Brazil ® Define Customer Groups for SubTrib Calculation.