Industrialization is any operation able to change the nature, the functioning, the finishing, the presentation, or the purpose of a product, or its improvement for consumption, such as: 

• Transformation: an operation from which a new product may be obtained using the raw material or an intermediate product,;
• Processing: improves the finishing, usage, and appearance of the product, or even modifies its function. It may also involve the ISS tax;
• Assembly: the parts are purchased for composing the final product, that remains under the same Tax Classification. It can also include the ISS tax;
• Packaging or Reconditioning modification of the product presentation by putting it in a package;
• Renovation or Reconditioning: renews or restores the product for usage. It may also involve the ISS tax;

The Decree 4,544/02 states on the IPI rules (RIPI), and the Decree 4,542/02 on the TIPI - IPI Levy Table.

These are typically IPI taxpayers:

• Industrial Sites - the ones that perform industrialization operations;
• Sites Equivalent to Industry - though they do not perform the industrialization, by a legal definition, mandatorily or optionally fit, they are dealt with as industry concerning IPI taxation.

Example:

An importer in the import and resale operations of imported goods.

The IPI generator fact typically occurs in the following situations:

• The outflow of an industrialized product from the industrial site;
• Goods import;
• Resale of the imported product.

It is important to notice that other IPI taxable events exist and they are mentioned in the legislation, which must be consulted by the user.

Different from the ICMS, the IPI is a tax to be separately calculated, and its calculation basis is the goods value in their selling price.

Example:

The IPI tax rates are fixed according to the product significance.

Thus, basic commodities are taxed with lower tax rates, so the more surplus to consumption the product is, the higher the taxation, with a higher rate.

To know the tax rate of a certain product, it is necessary to know its Tax Classification.

Each product has a specific classification, assigned according to the goods naming rules and, once it is identified, the corresponding IPI tax rate must be checked in the IPI Levy Table - TIPI.

The tax rates are determined according to the code in NCM/SH (Common Mercosul Nomenclature - Harmonized System), also found in TIPI records.

Each product has a specific tax rate, ranging among 0%, 1%, 2%, 5%, 10%, 15% and so on.

This principle regards the sum of taxes due as cumulative.

However, the IPI and ICMS taxes are not cumulative, that is, in the inflow, it is credited from the tax and, in the outflow, it is debited.

This way, the tax is non-cumulative, compensating what is due in each operation or service with what was previously collected by this or another State, related to the goods entered or to services received.

The credit balances are applicable to the following period. No credit exits if the outflow operation is exempt, suspended, or with a tax rate of “zero”, and consumption material.

Goods directly or indirectly used in the production may have IPI credit.

The Normative Instruction SRF no. 394 of February 05 2004 regulates the IPI calculation period.

Observe a part of the IN SRF 394:

About the IPI Calculation Period

Art. 1 - The calculation period of the Tax on Industrialized Products (IPI), levying in the products outflow from industrial or industrial-equivalent sites, is:

1. fortnightly, from January 1st 2004 to December 31st 2004; and
2. monthly, from January 1st 2005 on.

Sole Paragraph. This article is not applicable to:

1. products classified in chapter 22, positions 84.29, 84.32, 84.33, 87.01 to 87.06, and 87.11 and in the code 2402.20.00, from the IPI Levy Table (TIPI) approved by the Decree no. 4,542, of December 26, 2002, to which the calculation period is every ten days;
2. to IPI:
   1. due by small sized business when the calculation period is monthly;
   2. incurred on foreign products, on import.

The system has the following standard entries:

• 720 - IPI Calculation
• 721 - Reversal of IPI Calculation

Pursuant to Article 193, Item I of the RIPI, the calculation of the Credit Reversal is carried out in the calculation of the IPI.

The treatment provided is based on the process of acquiring goods (raw materials) with IPI credit, provided that these goods have been incorporated into the process of industrialization of the finished product and this has been sold as a product not taxed by IPI.

Notes

The treatment aims at the automatic and proportional calculation of the Credit Reversal in the calculation of the IPI for the cases of purchases of goods in which the appropriation of credit of IPI occurred, as long as these goods have been incorporated into the industrialization of finished products that had outputs without IPI levy according to the federal ruling: "Decree no.  4544 of December 26, 2002 (...)

Cancellation of Credit

Art. 193. The tax credit will be canceled with reversal in tax record (Statute No. 4,502, of 1964, art. 25, paragraph 3, Decree-Law No. 34, of 1966, art. 2, Amendment 8th, Statute No. 7,798, of 1989, art. 12, and Statute No. 9,779, of 1999, art. 11): (...)

Setup Procedure 

Important: Note the filling, because it is through this field that it will be identified whether it is raw material or a finished product for the calculation of Credit Reversal of IPI. All products involved must be entered. Example:

Raw material 01 

B1_ESCRIPI Field: 1 = M.P

Finished Product 01

B1_ESCRIPI Field: 2 = P.A

The MV_ESCRIPI parameter will be created with default content equal to F, i.e. not to display the row for the IPI Credit Reversal

Practical example

Incoming Invoices Taxed by IPI (Purchase of Raw Material for Industrialization)

Raw material 01 Month – January/2021

Total raw material 01 acquired: BRL 2,500.00

Quantity of raw material: 20

Month – February/2021

Total raw material 01 acquired: BRL 2,000.00

Quantity of raw material: 20

Month – March/2021

Total raw material 01 acquired: BRL 2,500.00

Quantity of raw material: 20

Outgoing Invoices (Exempted/Other sale of finished product that used the raw material 01 in industrialization):

Month – March/2021

Total finished product sold: BRL 18,000.00

Quantity of this product: 120

Finished product structure (Table SG1)

Finished product 01 – Quantity: 40

Raw Material 01 – Quantity: 80

In this structure, it is observed that, for every 1 finished product 2 raw materials are used.

IPI Credit Reversal Calculation

The calculation is performed as follows:

1. First, we perform the calculation of the average cost of the raw material acquired in the last 120 days. The number of days can be determined by means of the MV_DIAMED parameter. In this way, the average cost of raw material 01 will be: BRL 7,000.00 (sum of the Incoming Invoices) / 60 (quantity of raw material) = BRL 116.67;
2. In the Product Structure file (Table SG1), the amount of raw material used for each finished product will be calculated. In this example, for each 1 finished product, 2 raw materials were used, i.e. 80 (raw material quantity) / 40 (finished product quantity);
3. The quantity of the finished product sold in the month of the IPI calculation is verified, in this case, 120.

Thus, we will have the following calculation:

120 (quantity of finished product sold) * 2 (quantity of raw material used in the finished product) = 240

BRL 116.67 (Average Cost of Purchased Raw Material) * 240 (Total Raw Material Used in Industrialization) = BRL 28,000.80 * 10% (rate of acquired raw material) = BRL 2,800.08.

The amount of BRL 2,800.08 will be the amount of the IPI Credit Reversal to be automatically entered in the IPI calculation.

Usage Procedures

To perform the IPI credit reversal:

1. In SIGAFIS, access the IPI calculation routine (MATA952) using the menu Miscellaneous->Calculations->IPI Calculation menu
2. Fill in the questions regarding the routine.

After confirmation, a screen with the IPI Calculation Summary is displayed. In the summary, it presents the row Credit Reversal - Art.193, Item I of the RIPI referring to the automatic calculation performed in the system.

The IPI calculation routine is responsible for calculating the IPI balance (debt or credit) related to the taxpayer's operations.

The tax is calculated upon a period selection, enabling the input of other credits and debts, their reversals, besides the previous period credit balance.

Access the routine and view the information screen; and, to proceed, click the Parameters option.

1. The parameters screen is displayed. 
2. The parameters of this routine are self-explanatory.
3. When the parameters are filled out, confirm them.
4. The system displays a screen including the total of calculations performed. Confirm the screen and check that the system displays a new screen summarizing the calculation performed.
5. If there is a manual edition, double click the line desired and edit the value found by the system. Once this is done, confirm and view the new screen for additional calculation information.
6. After confirming, view the screen to enter the data related to the tax, due date, and collecting agency. Fill in the details to confirm and return to the home screen.

Follow the instructions in Main Fields to fill out the data.

See also the features available in Other Actions.

It is possible to group the values generated in the calculation of the IPI by CNPJ (SSN) and IE using the question *Group by SSN + IE?* that appears in the routine parameters.

Important

• This will only work if question Select Branches is set to Yes.
• When used, the branch selection window will be sorted by SSN (CNPJ).
• In order to use grouping, the customer should consult their legal department to verify that their branch of activity allows such grouping.

Usage procedures 

1. In SIGAFIS, access the IPI calculation routine (MATA952) using the menu Miscellaneous->Calculations->IPI Calculation.
2. In the Select Branches question, enter Yes.
3. In the question Group by SSN+IE, select
4. When you confirm the questions, the Branch Selection window appears. In this window, select branches with the same SSN (CNPJ) and IE. 

By performing the above steps, the calculation will be grouped with the selected branches.