Tax concessions

Few federal tax concessions are available to local and foreign investors. Those that exist are designed to accelerate the development of
certain less developed regions and of industries considered to be of importance to the economy. However, in general, there are no tax concessions specifically designed to attract foreign investors.
State and local tax concessions vary depending on the importance of the prospective investor to the area.

Regional incentives

Regions affected
The following regional agencies are responsible for development in the listed states:

SUDENE (Northeast region)

Alagoas
Bahia
Ceará
Espírito Santo
Maranhão (part)
Minas Gerais (part)
Paraíba
Pernambuco
Piauí
Rio Grande do Norte
Sergipe

SUDAM (Legal Amazon)

Acre
Amapá
Amazonas
Maranhão (part)
Mato Grosso
Pará
Rondônia
Roraima
Tocantins

Tax incentives

For the Northeast and Amazon regions, the investment incentive plans administered by SUDENE and SUDAM, respectively, offer certain
fiscal benefits to companies operating approved projects. These are as follows:

75% reduction of the income tax and nonrefundable
surcharges due on operating
profit (lucro de exploração), for a maximum
period of ten years, for implementation,
expansion, diversification and improvement
projects submitted and approved from August
24, 2000, to December 31, 2018, relating to
economic segments considered to be a priority
for the development of these regions.

12.5% reduction of income tax and nonrefundable
surcharges, from January 1, 2009,
until December 31, 2013, for legal entities
which maintain economic enterprises that
participate in the development of these
regions. Legal entities which own such
projects may apply for the abovementioned
reduction of 75%, within a period of ten
years, provided that their activities fall
into economic segments considered by the
government to constitute a priority for the
development of these regions.

The corporate income tax reduction cannot be distributed to the company’s quotaholders/ shareholders and must be booked and kept as a subsidy reserve (capital reserve), to be used only for capital increases or offsetting existing losses.

Certain state VAT (ICMS) incentives are also made available to certain businesses, depending on the nature and peculiarities of the project.

Non-tax incentives
For companies in the Northeast and Amazon regions, low-cost loans or loan guarantees are granted by government development banks,
such as the Bank of Northeast Brazil (BNB), the Amazon Bank (BASA) or the National Bank for Social and Economic Development (BNDES).

Special tax regimes

Special tax regimes are provided by Brazilian legislation to benefit some specific economi activity sectors; the main special tax regimes are described below. (Please note that, in most cases, taxpayers must comply with the application requirements due for each special tax regime, as well as other special requirements and ancillary obligations.)

Digital Inclusion Program

Grants 0% tax rate for PIS and COFINS; applicable for sales that take place until December 2014.
Corporate Income Tax (CIT) exemption, calculated on the operating profit (lucro de exploração), may also be granted.

Incentive for the Auto and Auto Parts
Industries located in the North, Northeast and Midwest regions – Grants IPI presumed credit as compensation for PIS and COFINS. Expires in December 2020.

Incentives for the Computer and Automation Industry
Grants gradual reduction of IPI, with variable applicable rates. Expires in December 2019.

Incentives for the Technological Industry 
Allows costs and expenses for staff training in software development to be excluded from net income.

PADIS (Support Program for the Technological Development of the Semiconductor Industry)
Grants a 0% tax rate for Import Tax, PIS/COFINS, PIS/ COFINS-Import, IPI and CIDE. CIT exemption, calculated on the operating profit (lucro de exploração), may also be granted. Expiration date varies, being between December 2020 and January 2022.

PATVD (Support Program for the Technological Development of the Digital Television Equipment Industry)
Grants a 0% tax rate for Import Tax, PIS/COFINS, PIS/ COFINS-Import, IPI and CIDE.

RECAP (Special Regime for the Acquisition of Capital Goods for Export Companies) 
Grants suspension of PIS/COFINS and PIS/ COFINS-Import.

RECINE (Special Tax Regime for the Development of the Cinematographic Exhibition Activity)
Grants suspension of PIS/COFINS, PIS/COFINS-Import, IPI and Import Tax.

REIDI (Special Incentive Scheme for Development of Infrastructure)
Grants suspension of PIS/COFINS and PIS/ COFINS-Import.

RENUCLEAR (Special Regime of Incentives for the Development of Nuclear Power Plants)
Grants suspension of IPI and Import Tax. Applicable for acquisitions and imports that take place before December 2015.

REPENEC (Special Incentive Regime for the Development of Oil Infrastructure in the North, Northeast and Midwest)
Grants suspension of PIS/COFINS, PIS/COFINSImport, IPI and Import Tax.

REPES (Special Tax Regime for the Export Platform of Information Technology Services)
Grants suspension of PIS/COFINS, PIS/ COFINS-Import and IPI.

REPORTO (Tax Regime to Stimulate the Modernization and Extension of the Port Structure)
Grants suspension of Import Tax, IPI, PIS/COFINS and PIS/COFINS-Import.
Applicable for some acquisitions and imports that take place until December 2015.

RET (Special taxation regime)
The real estate developers that opt for this regime are subject to corporate income (IRPJ), social contributions (CSLL), PIS and COFINS taxes at a combined rate of 6%. This rate is applied to the gross revenues from the sale of real estate assets. The 6% unified tax rate is further reduced to 1% for those residential projects that are considered to be of social interest – houses with a fair market value of up to BRL 85,000 (approximately US$ 41.595). This combined reduced rate of 1% is available until December 31, 2014, for projects
initiated from March 31, 2009.

RETAERO (Special Regime of Tax Incentives for the Brazilian Aviation Industry)
Grants suspension of PIS/COFINS, PIS/COFINS Import and IPI.

Technological Innovation Benefits
Allows (i) deductible expenses, (ii) full depreciation, (iii) accelerated amortization, and (iv) deduction up to 60% (reaching up to 80%
in some cases) of some expenses for CIT purposes. This incentive also grants reduction to a 0% tax rate for Withholding Income Tax
(WHT) levied on some remittances abroad, as well as reduction of IPI, Law 12, 715, published on September 18, 2012, brought about a few changes to some of the abovementioned incentives and also created a few new tax incentives, as follows:

INOVAR-AUTO (Incentive Program for Technical Innovation and Consolidation of the Motor Vehicles’ Supply Chain)
Grants IPI presumed credit. In principle, the application to this regime will be able to take place only until March 31, 2017

REPNBL-Redes (Special Tax Regime of the Broadband National Program for Implementation of Telecommunication Networks)
Grants suspension of PIS/COFINS and IPI. Applicable for construction, implementation, expansions or upgrades of telecommunication networks that take place until December 31, 2016.

REICOMPE (Special regime for the
manufacturing of computer equipment under
the One Computer per Student Program
(PROUCA))
Grants suspension of IPI, PIS/ COFINS, PIS/COFINS-Import, Import Tax and CIDE. This incentive also grants IPI exemption on the sale of computer equipment under PROUCA. Expires on December 31, 2015. PROUCA aims to promote digital inclusion in public schools or private schools for nonprofit purposes with a focus on disabled people. PROUCA was re-established by this provisional measure with new terms. The new version will also expire on December 31, 2015.

Source: PWC

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