Brazil Enacts Tax Breaks, Creates Special Customs Regime With Paraguay
- Brazil
- 03/11/2009
- Azevedo Sette Advogados
Brazil’s official gazette of January 9 published Law 11,898/2009, which creates a new customs regime for imports of merchandise from Paraguay by small-business companies and introduces benefits for cleaning, conservation, and maintenance companies as well as manufacturers located within some free trade zones in the Amazon region.
Law 11,898/2009 creates the so-called Unified Tax Regime (Regime de Tributação Unificada, or RTU), whereby small Brazilian business companies are eligible to import a specified volume of merchandise by land from Paraguay under a less burdensome customs regime.
A standard tax of 42.25 percent will apply to all imports under the RTU, which includes import duties (18 percent), the federal excise tax (IPI) (15 percent), and the Program for Social Integration (P.I.S.) and Contribution for the Financing of Social Security (COFINS) levied on imports (1.65 percent and 7.6 percent, respectively). The RTU does not encompass the state VAT (ICMS), which will be regulated by state laws.
Law 11,898/2009 also covers RTU rules on election to the regime, customs control, payment of tax, accessory obligations (for example, tax filings), and penalties for violation of RTU rules.
The law changes rules concerning the noncumulative P.I.S. and COFINS regimes for cleaning, conservation, and maintenance companies. Under the law, because those companies are labor-intensive, they may now take P.I.S. and COFINS credits on some expenses incurred on behalf of employees, namely, food and meal vouchers, transportation allowances, and uniforms.
The credits will reduce the burden of those taxes on eligible companies. However, analysts are already debating the credits’ extension to other labor-intensive sectors, such as call centers and telemarketing, security, value transportation, and civil construction. They argue that if the law considers those items P.I.S./COFINS creditable for one or a few sectors, the same tax treatment should apply to other sectors under the constitutional principle of equality.
Finally, Law 11,898/2009 grants full IPI exemption for products manufactured within some Brazilian free trade zones located within the Amazon region, namely, those located in the cities of Tabatinga (state of Amazonas), Guajará-Mirim (state of Rondônia), Macapá and Santana (state of Amapá), and Brasiléia and Cruzeiro do Sul (state of Acre). The IPI exemption will be granted if specific requirements are met. For example, the relevant manufacturing project must have been approved by the Manaus Free Trade Zone Superintendence, and most of the final product’s raw materials from animal, vegetal, and mineral origins must be produced locally (within the region). The exemption does not apply under some conditions to arms, ammunition, tobacco, alcoholic beverages, passenger vehicles, and cosmetic and personal hygiene products.
David Roberto R. Soares da Silva, tax partner, Azevedo Sette Advogados, São Paulo
Originally published in the January 15 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
