Brazil

Details

  • Service: Tax, International Corporate Tax, Transfer Pricing Services
  • Type: KPMG information
  • Date: 4/5/2012

Tax News: New tax incentives  

New tax incentives to foster manufacturing in Brazil

 

Aimed at stimulating the country’s industrial sector and at helping Brazil to keep on its path towards significant rates of economic growth, the Brazilian Federal Government enacted a new economic stimulus package through Provisional Measure 563, dated April 3, 2012. The new measures consist of some tax incentives and tax benefits that may entitle companies from specific sectors of industrial activities to tax credits and exemptions. Some of those new incentives are described below:

Inovar-Auto: (PRL) Created with the main purpose of promoting technological development, innovation, environmental protection in the automotive sector and improving the quality of cars, trucks, buses and auto parts produced in the country, this incentive may grant an IPI presumed tax credit to companies established or planned to establishing in Brazil, engaged in the manufacture process of products listed in codes from 87.01 to 87.06 of TIPI (IPI tax rate table).

Padis: The Padis program was originally introduced in 2007 in order to foster technological development of the semiconductor industry, by granting a reduced Income Tax, IPI, Pis and Cofins and Cide rates. Provisional Measure 563/12 extended Padis benefits to companies acquiring raw materials and equipment to be applied in the manufacturing process of semiconductors electronic devices and specific displays, such as those based on crystal liquid display.

Social Security Contributions (INSS): An additional reduction of the social security contribution rate has been granted, modifying the recently introduced reduced rates of 2.5% and 1.5% to 2% and 1%, respectively. In this sense, for instance, companies engaged in the hotel operating sector (hotels and lodgings) and IT sector must calculate the INSS due by applying a 2% tax rate on its gross revenues. In its turn, companies engaged in sectors such as auto parts, capital goods, IT, auto manufacturers, computer chips, ship and aviation industries, must apply a 1% tax rate instead.

Besides the benefits mentioned above, the economic stimulus package also foresees the possibility of granting suspension of Pis, Cofins and IPI to companies (i) engaged in projects to implement and improve telecommunication system that supports the access to broadband internet, in accordance with the REPNBL-Redes tax incentive; (ii) engaged in the production of hardware and software in the context of the REICOMP tax incentive, provided specific conditions are met.

The Provisional Measure 563/12 also contains several changes to transfer pricing legislation, including methods to compute profit margins, which will be addressed in an upcoming tax news flash.

For more information, contact a tax professional with KPMG in Brazil:

International Corporate Tax Group

São Paulo

Marienne Coutinho, +55 11 2183-3182, mmcoutinho@kpmg.com.br
Ericson Amaral, +55 11 2183-3375, eamaral@kpmg.com.br
Murilo Mello, +55 11 2183-3261, murilomello@kpmg.com.br
Fabiana Pereira, +55 11 2183-6571, fvpereira@kpmg.com.br
Fernando R. Martins, +55 11 2183-3284, fmartins@kpmg.com.br
Valter Shimidu, +55 11 2183-3269, vshimidu@kpmg.com.br

Rio de Janeiro

Roberto Haddad, +55 21 3515-9469, robertohaddad@kpmg.com.br
Julio C. de Cepeda, +55 21 3515-9133, jcepeda@kpmg.com.br
Mauro Ostwald, +55 21 3515-9417, mfostwald@kpmg.com.br

Global Transfer Pricing Services Group

São Paulo

Eliete Ribeiro, +55 11 2183-3288, eribeiro@kpmg.com.br
Henrique Conti, +55 11 2183-3278, hconti@kpmg.com.br
Evandro Tiba, +55 11 2183-1824, etiba@kpmg.com.br
Ricardo Roa, +55 11 2183-6596, rroa@kpmg.com.br

 

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