UPDATE 1-Brazil offers tax advantages via e-commerce compliance program

(Adds quote from finance minister Haddad in paragraph 3)

BRASILIA, June 30 (Reuters) – Brazil’s Finance Ministry announced on Friday an exemption from federal taxes on e-commerce purchases up to $50 for companies participating in a new compliance program by the tax revenue service.

The country has been trying to close a loophole that some Asian e-commerce giants were seen using to gain tax exemptions by sending shipments as if they were individuals and not businesses.

Finance Minister Fernando Haddad told reporters the new aims to “balance competition” between marketplaces, addressing worries from local retailers.

Currently, shipments by companies of any value are subject to a 60% federal tax rate on imports, while shipments by individuals are exempt for orders up to $50, with the same tax rate applied above that amount.

The program, starting Aug. 1, offers faster and cheaper customs treatment for e-commerce companies that voluntarily meet the criteria set by the government, the ministry’s statement said.

The criteria include declaring imports and collecting taxes, by adding them to the price of products, before merchandise arrives in the country.

Under the program, e-commerce companies must also inform consumers about the origin and total value of the product, including federal and state taxes. Currently, these procedures are optional.

Taxes, if applicable, are currently paid by consumers after the merchandise arrives, following analysis and notification by the revenue service, resulting in longer delivery times.

The program will essentially relieve the revenue service of such tasks when e-commerce firms participate.

Previously, the government tried to end exemptions on all shipments as some companies imported products as individuals to avoid higher rates.

Alibaba Group’s AliExpress, Sea Ltd’s Shopee and fast-fashion giant Shein were identified as the main targets of the measure.

After opposition from the public, the government decided to maintain the tax exemption up to $50 but only for shipments made by individuals, stating it would explore a digital tax collection model for companies. (Reporting by Marcela Ayres; Editing by Emma Rumney and David Gregorio)