A subject that certainly generates discomfort among accounting, tax, billing and foreign trade professionals is related to the Tax Classification of Goods. It is a very specific knowledge and those who depend on this classification to finalize their work know the need to apply the rules in force and the high complexity of the matter. If the professional needs to complete a tax classification of goods, but is not sure, what should be the procedure to be followed to avoid errors that harm the good progress of activities? We will see in this post the characteristics of this classification.
Because they affect both domestic and foreign market operations, the rules to be followed were not edited by local Brazilian rulers. The initial objective, since the 19th century, was to statistics and to standardize products that began to be made in series.
During this period, several nomenclatures were created and today it is foreseen by the General Agreement on Tariffs and Trade, of the English acronym GATT, known as Harmonized System of Goods Description and Codification, commonly called Harmonized System (HS), in force since 1988 and undergoing several changes since then.
It is an international publication, whose objective is to standardize the entire international flow of goods, gathering statistical data and, of course, serving as a basis for governments to apply their tax rules.
The standardized HS code is composed of 6 digits, subdivided into 3 sequential and independent pairs, making it possible to identify the characteristics of each good as origin, raw materials that compose it, direct application among other information.
The first pair of digits makes up the standardized chapter and can be numbered from 01 to 99, representing the most diverse types of existing goods. The pair that follows represents the position that a given product occupies within the respective chapter. In this case, it already has some more specific characteristics, less generalized than in the first pair of numbers.
The fifth digit represents the 1st level subheading and the last digit represents the 2nd level subheading, both varying from 1 to 9, forming categories that represent the totality of goods currently circulating.
It should be noted that the HS also consists of Explanatory Notes, called NESH, providing additional clarification necessary for the complete application of the HS in the classification of goods.
In Brazil, 2 more digits are adopted at the end, making the code have the 7th and 8th digits, called item and sub-item, respectively. This classification in Brazil has the objective of facilitating and making viable the fiscal application of each merchandise, being adopted not only by Brazil, but by all MERCOSUR signatory countries.
Therefore, in order to correctly classify the goods in Brazil, besides being completely informed about the generic HS, the professional must also study the rules in force in MERCOSUR, besides, of course, knowing in detail the characteristics of the products to be classified.
Procedure to avoid fines for poor classification
In case of doubt regarding the classification, the Federal Revenue Service is the Brazilian agency in charge of defining the correct codifications for all cases. Therefore, before classifying a product, it should be consulted in order to avoid the occurrence of fines for errors at the time of classification.
The Fiscal Classification of Goods is important because it standardizes the codification for products not only in Brazil, but also in other countries that have signed the same agreement. However, one must pay attention to the Brazilian specificities and, with this, avoid unnecessary fines. Does this classification generate many operational problems in your company? Leave us a comment!