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Analysis

Brazilian opportunities and taxes incentives on investments

The recent improvement in the business environment of the Brazilian economy makes the time for new investments to take advantage of the low interest rate and high liquidity movement in the stock market.

Learn more about the main incentives for investing in Brazil.

Tax Incentives and Exemptions

Special regime of incentives for infrastructure development (REIDI)

What is it?

It provides for the waiver of PIS / PASEP and COFINS in the acquisition of:
- New machinery, apparatus, instruments and equipment, as well as building materials for use or incorporation in infrastructure works intended for the fixed assets;
- Services for infrastructure works for incorporation into fixed assets.

In order to enjoy this benefit, as qualified or co-qualified, companies must submit to the Federal Revenue Service (RFB) a copy of the Administrative Rule that approved the infrastructure work, published by the Ministry of the respective sector.

Who benefits?

Infrastructure projects in the sectors of:
- Transportation, covering only roads and waterways; organized ports and port facilities for private use; commuter trains and railways, including engines and wagons; and airport systems and flight protection systems to installed in public airfields;
- Energy, covering only generation, co-generation, transmission and distribution of electricity; and production and processing of natural gas in any physical state;
- Sanitation, covering only drinking water supply and sewers sanitation;
- Irrigation; and
- Pipelines.

Legislation

- Law No. 11,488, of June 15th, 2007 - Creates the Special Regime of Incentives for Infrastructure Development - REIDI;
- Decree No. 6167 of July 24th, 2007; Decree No. 6416 of March 28th, 2008; and Decree No. 7367 of November 25th, 2010 - Alter and add provisions to Decree No. 6144 of July 3rd, 2007, which regulates the form of qualification and co-qualification to the Regime;
- SRF Normative Instruction 758, of July 25th, 2007, as amended by SRF Normative Instruction No. 778, of October 19th, 2007; by RFB Normative Instruction 955, of July 9th, 2009; by Normative Instruction RFB No. 1,237, of January 11th, 2012; by Normative Instruction RFB No. 1,267, of January 11th, 2012 and Instruction RFB No. 1,367, of June 20th, 2013;

Mines and Energy Sector - MME Administrative Rule No. 319 of September 26th, 2008;
Transportation Sector - MT Administrative Rule No. 124 of August 13th, 2013, published on August 14th, 2013;
Ports Sector - SEP Administrative Rule No. 124 of 08.29.2013, published on August 30, 2013.

For a full list of companies qualified to REIDI in the Federal Revenue Service, please access this link (content in Portuguese)

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Tax incentive for the modernization and expansion of the port structure - reporto

What is it?

A Special tax regime for the acquisition of machinery and equipment waiving the incidence of IPI, Cofins, PIS / Pasep and import tax (in the case of equipment without a national comparable product)
Deadline: until December 31st, 2015.

Who benefits?

- Port Operators;
- Concessionaires of Organized Ports;
- Tenant of Port Facilities of Public Use;
- Company authorized to exploit Port Facilities of Private Use;
- Railway Concessionaire;
- Dredging Companies in rivers, lakes, seas, bays and canals;
- Secondary zone customs facilities; and
- Professional training centres set up by CAPs (Port Authority Councils).

Legislation

- Law No. 11,033, of December 21st, 2004 - Establishes the REPORTO.
- Law No. 11,774, of September 17th, 2008 - Extends the benefit to railway concessionaires.
- Decree No. 6582 of September 26th, 2008 - Establishes the list of machinery, equipment and goods entitled to the waiver referred to in art. 13 of REPORTO's originating Law.
- Normative Instruction RFB No. 1370, July 1st, 2013 - Regulates the application of the Tax Incentive for the Modernization and Expansion of Port Structure (REPORTO).

For a full list of companies qualified to REPORTO in the Federal Revenue Service, please access this link (content in Portuguese)

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI

IOF exemption for the financing of logistics infrastructure projects aimed at construction of roads and railways object of concession by the Federal Government

What is it?

Exemption of the Tax on Financial Operations (IOF) on the financing of road and rail infrastructure projects.

Who benefits?

Infrastructure works on roads and railways.

Legislation

- Decree No. 8,325, of October 7th, 2014

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

IPI relief on machinery and equipment

What is it?

The rates of the Tax on Industrialized Products (IPI) for most capital goods items have been reduced to zero.

Who benefits?

Industrial companies, users of capital goods.

Legislation
- Decree No. 7.660, of December 23rd, 2011, which consolidated the Table containing the Incidence of Tax on Industrialized Products - TIPI.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI
Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Payroll relief

What is it?

Elimination of the employer contribution to the National Social Security Institute (INSS), with partial offset of a new rate on gross income, excluding gross revenue from exports.

Who benefits?

Companies from the following sectors:

- Road transportation
- Aviation and maritime transportation
- Aircraft maintenance
- Passenger rail or underground transportation
- Cargo road and rail transportation
- Loading and unloading in ports
- Construction of infrastructure works
- Journalism companies
- IT and ICT
- Furniture industry
- Clothing industry
- Industry of leather goods.
- Hospitality
- Retail business
- Maintenance and repair of vessels
- Technology.

Legislation

- Law No. 12,546 of December 14th, 2011.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Taxation regime on micro and small businesses - National "simples"

What is it?

Unified system of calculation and collection of taxes and contributions of the federal level (social contribution, PIS, COFINS, IPI, INSS on payroll), state level (ICMS), Federal District and municipal level (ISS), including simplification of accessory tax obligations.

Who benefits?

Differentiated, simplified and favoured treatment for Micro and Small Businesses

Legislation

- Complementary Law No. 123 of December 14th, 2006 - Establishes the National Statute of Micro and Small Businesses, as amended by: Complementary Law No. 127 of August 14th, 2007; of Complementary Law No. 128 of December 19th, 2008; Complementary Law No. 133 of December 28th, 2009 and Complementary Law No. 139 of November 10th, 2011

Decree No. 6,038, of February 7th, 2007 - Establishes the Committee on Tax Management for Micro and Small Businesses;
-Decree No. 6,451, of May 12th, 2008 - provides for the establishment of the "Simples" Consortium for micro and small businesses opting for the National "Simples".

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI
Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Special incentive regime for infrastructure development of the oil industry in the north, notheast and midwest regions - Repenec

What is it?

Waiver of taxes on the development of projects for the implementation of infrastructure works in the North, Northeast and Midwest regions, in the petrochemical sector, oil refining, and production of ammonia and urea from natural gas, for legal entities entitled to the regime, in the sale of machinery and equipment; sales of building materials; service provision; and / or rental of machinery and equipment for use in the works under the incentive regime.

The taxes waived are: PIS / COFINS; IPI over the output of industrial establishments or equivalent; Importation-PIS / PASEP and Importation-COFINS; IPI and Import Tax.

Who benefits?

Legal entities with an approved project for the implementation of infrastructure projects in the North, Northeast and Midwest, in the petrochemical sector, oil refining, and production of ammonia and urea from natural gas, for incorporation into their fixed assets.

Legislation

Law No. 12,249, of June 11th, 2010, regulated by Decree No. 7,320, of September 20th, 2010.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment – RENAI

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Incentives to technological innovation

What is it?

- Tax incentives, such as CSLL deductions for expenditures on R&D activities;
- IPI reduction in the purchase of machinery and equipment for R&D;
- Full depreciation of these assets in the year of acquisition; accelerated amortization of intangible assets;
- Income Tax Reduction withheld at source over remittances abroad resulting from technology transfer agreements;
- Income Tax Exemption withheld at source over remittances abroad aimed at registration and maintenance of trademarks, patents and plant varieties; or
- Economic subsidies granted under hiring of researchers, with Masters or Doctorate levels, employed by companies to carry out research, development and technological innovation activities.

Who benefits?

Legal entities carrying out technological research and development of technological innovation.

Legislation

- Law No. 11,196 of November 21st, 2005 ("Lei do Bem", The Good Law) - Establishes, among other provisions, the Digital Inclusion Program (Chapter III - Articles 17-26);
- Law No. 11,487, of June 15th, 2007 - Includes new incentives for technological innovation and modifies the rules on accelerated depreciation for investments linked to research and development;
- Decree No. 5798 of July 7th, 2006 - Regulates tax incentives for technological research and technological innovation activities; and
- Decree No. 6909 of 22nd July, 2009 (accelerated depreciation) - Amending Decree No. 5,798, 2006 ; and
- MCT Administrative Rule No. 327 of 29th April, 2010 - Electronic form for legal entities beneficiaries of the tax incentives provided for in Chapter III of Law No. 11,196, 2005.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI
Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Early return of IR (income tax) and PIS / COFINS

What is it?

Gradual reduction of the period for return of credits from PIS-Pasep and COFINS on capital goods, from 12 months up to immediate return.

Previously, it used to be returned to acquirers of such goods in the form of tax credits offset in 24 months.

Who benefits?

Legal entities, in the cases of domestic purchase or importation of machinery and equipment for the production of goods and service provision, which may choose to discount the credits from PIS and COFINS contributions.

Legislation

- Law No. 11,051, of December 29th, 2004 - Establishes the measure, with 24 months to return PIS / COFINS
- Law No. 11,196 of November 22nd, 2005 - Extends the measure for an indefinite period;
- Law No. 11,487 of July 15th, 2007 - Includes new incentive for technological innovation;
- Law No. 11,774, of September 17th, 2008 - Reduces the period for 12 months.
- Law No. 12,546, of December 14th, 2011 - Establishes the term reduction schedule, up to immediate return, in the case of acquisitions as of July 2012.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Import tax reduction for machines that are not produced in the country ("Ex-tariff" regime)

What is it?

Special tax regime with temporary reduction of the rate of importation duty for capital goods (BK) and information technology and telecommunications goods (BIT), as well as their pieces, parts and components.

Basic requirements: No domestic production and compliance with the country's development policies. The regime does not apply to "used goods" or "integrated systems".

Who benefits?

Industrial companies and service providers.

Legislation

The regime is granted by Resolution No. 66, of August 14th, 2014, of the Foreign Trade Chamber (Camex) after consulting the "Ex-Tariff" Review Committee (Caex).

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI
Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Regional incentives

Tax Incentives for Regional Development

What is it?

A 75% (seventy five percent) tax reduction, including non-refundable extras, for a period of ten years for enterprises that submit until December 31st, 2018.

Who benefits?

Priority private investments, productive activities, and sub-regional development initiatives, for companies located in the regions covered by SUDAM and SUDENE.

Legislation

- § 2 of art. 43 of the Federal Constitution;
- Provisional Measure No. 2199-14 of August 24th, 2001: Changes income tax legislation as regards tax exemption and reduction incentives, defines guidelines for tax incentives on application of part of the tax on Regional Investment Funds.
- Decrees No. 4212 and 4213, of April 26th, 2002, defines the priority sectors of the economy for regional development.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI
Source: Ministry of Development, Industry and Foreign Trade (MDIC)

IRPJ reduction for existing projects

What is it?

A 12.5% reduction of income tax, including non-refundable extras, from January 1st, 2009 to December 31st, 2013.

Who benefits?

Priority private investments, productive activities, and sub-regional development initiatives, for companies located in the regions covered by SUDAM and SUDENE.

Legislation

- § 2 of art. 43 of the Federal Constitution;
- Provisional Measure No. 2199-14 of August 24th, 2001: Changes income tax legislation as regards tax exemption and reduction incentives, defines guidelines for tax incentives on application of part of the tax on Regional Investment Funds.
- Decrees No. 4212 and 4213, of April 26th, 2002, defines the priority sectors of the economy for regional development.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Reinvestment of IRPJ

What is it?

Reinvestment, of 30% of the tax due, in modernization projects or equipment complementation projects, until the 2018. The request and granting of the benefit depend on liaison of the beneficiary with the Regional Superintence and the respective Operating Bank.

Who benefits?

Priority private investments, productive activities, and sub-regional development initiatives, for companies located in the regions covered by SUDAM and SUDENE.

Legislation

- § 2 of art. 43 of the Federal Constitution;
- Provisional Measure No. 2199-14 of August 24th, 2001: Changes income tax legislation as regards tax exemption and reduction incentives, defines guidelines for tax incentives on application of part of the tax on Regional Investment Funds.
- Decrees No. 4212 and 4213, of April 26th, 2002, defines the priority sectors of the economy for regional development.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

AFRMM exemption

What is it?

For enterprises to deploy, modernize, expand or diversify in the Northeast Region by December 31st 2015. The benefit must be requested from the Regional Superintendence of the area.

Who benefits?

Priority private investments, productive activities, and sub-regional development initiatives, for companies located in the regions covered by SUDAM and SUDENE.

Legislation

- § 2 of art. 43 of the Federal Constitution;
- Provisional Measure No. 2199-14 of August 24th, 2001: Changes income tax legislation as regards tax exemption and reduction incentives, defines guidelines for tax incentives on application of part of the tax on Regional Investment Funds.
- Decrees No. 4212 and 4213, of April 26th, 2002, defines the priority sectors of the economy for regional development.

Source: Ministry of Development, Industry and Foreign Trade - MDIC, Secretariat for Production Development - SDP, National Network of Information on Investment - RENAI
Source: Ministry of Development, Industry and Foreign Trade (MDIC)

Incentive to accelerated depreciation and discount on PIS / PASEP and COFINS contributions

What is it?

Legal entities beneficiaries of the incentive of 75% reduction of income tax are entitled to accelerated depreciation of assets acquired, for the purposes of income tax calculations, and with a discount on credits of PIS / PASEP and Cofins contribution. The Regional Superintence grants the benefit, after analysing beneficiaries' requests regarding compliance with the legislation and the rules governing the incentive.

Who benefits?
Priority private investments, productive activities, and sub-regional development initiatives, for companies located in the regions covered by SUDAM and SUDENE.

Legislation
- § 2 of art. 43 of the Federal Constitution;
- Provisional Measure No. 2199-14 of August 24th, 2001: Changes income tax legislation as regards tax exemption and reduction incentives, defines guidelines for tax incentives on application of part of the tax on Regional Investment Funds.
- Decrees No. 4212 and 4213, of April 26th, 2002, defines the priority sectors of the economy for regional development.

Source: Ministry of Development, Industry and Foreign Trade (MDIC)

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