Applying withholding tax for accounts receivable is a common business practice in Brazil, especially in the automotive industry. The government determines all items that are subject to withholding tax on the basis of the item’s fiscal class. There is no threshold control for withholding tax for accounts receivable for automotive companies.

When applying withholding tax for accounts receivable, the nota fiscal must contain the full amount charged to the customer. However, the accounts receivable sub-ledger must show the amount net of withholding tax because the Boleto Bancario contains the amount net of tax withheld.