Brazil is a signatory Nation of several international treaties, and specifically touching South America down, the territory is encompassed by the South Cone Market (Treaty of Asunción in force in Brazil since November 22, 1991), by ALADI – Latin American Integration Association (Treaty of Montevideo in force in Brazil since March 24, 1982) and by UNASUL – South American Nations Union (UNASUL Treaty was signed on May 23, 2008 in Brasilia, DF), and the good news is, even though late in time, that there is a relevant piece of law which has been recently introduced and is currently under debate and appraisal by the Brazilian National Congress (before the Human Rights and Shared Legislation Commission) known as Bill 726/2011, foreseeing the grant of tax holidays to projects which favor regional integration in South America by Foreign Direct Investment initiatives.
So that whichever venture (industry and services) which pursue joint efforts of bi-national parties whose respective headquarters are located in the South American Region will benefit from a determined tax holiday treatment granted by federal government, under the control of the Brazilian IRS, namely: exemption of Social Contribution on Net Profit “CSLL” (industry 9% – services 1%), exemption of Enterprise Income Tax “IRPJ” (industry 15% – services 1.5%) and exemption of Tax on Manufactured Products (from 0% to 330% – it can vary depending upon the type of good). Integration entrepreneurships shall only be able to be considered those ones which fit into at least one of the following features, among others: (a) activities which would end-up effectively as specialized companies in the production of goods and services involving at least two countries holding potential to attend not only the domestic market demand, but also other countries of that economic block; (b) activities which would be jointly carried out, through cross-border regional business agreements or capital investments; or (c) economic activities which would favor the regional integration affecting infrastructure sectors like transportation, energy and telecommunications or exploitation and industrialization of mineral resources. Hopefully, that praiseworthy Bill does not take too long to be enacted, because as the sooner it becomes law and comes into force, the better will be for the generation of business initiatives between companies willing and ready to benefit from that tax treatment opportunity which reflects a win-win situation actually, once encourages investors, persons, and governments to act as development, progress and social pacification accomplishers.
Other novelty which we consider much positive comes through the Bill PL 2800/2011 sponsored by the Representative Nilson Leitão (PSDB/MT), granting tax holidays to companies (with national or foreign owned capital stock) placed and operating in Brazilian municipalities with low HDI – Human Development Index (i.e., under 0,750 (*), as follows:
(i) permanent benefit: reduction of 50% (fifty per cent) of Import Tax and of Tax on Manufactured Products charged on movable goods, machinery and equipment destined to be accrued as fixed assets of the investing company; and
(ii) temporary benefit: reduction of 50%, (fifty per cent) for 5 (five) five years counted from the company incorporation date on: (a) Enterprise Income Tax “IRPJ” – dropping from 15% to 7,5%; (b) Social Contribution on Net Profit “CSLL” (industry dropping to 4,5% – services dropping to 0,5%); (c) Contribution for Social Security Funding “COFINS” – from 7.6% dropping to 3,8%; and (d) Enterprise Social Security Contribution – from 20% dropping to 10%.
If you would like to know more about that matter please contact Fischer Law Firm and we will be honored to perform joint efforts pursuing to render the customized support you are looking for.
(*) towns located in the north, northeast and midwest regions.