Originally published in the July 10 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil has published in the July 4 official gazette Decree No. 6,144/07, which regulates the grant of a special tax regime for infrastructure projects, which were part of the economic and tax package (Programa de Aceleração do Crescimento) launched by President Luiz Inácio Lula da Silva on January 22
The Special Incentive Regime for Infrastructure Development (REIDI) was created by provisional measure 351/07 (eventually converted into Law No. 11,488/07) and allowed eligible companies to receive suspension of the P.I.S. (Program for Social Integration contribution) and COFINS (Contribution for the Financing of Social Security) on local purchases and imports of new machinery, instruments, equipment, and construction materials for use in infrastructure works that will be included in their fixed assets. It also granted P.I.S. and COFINS suspensions for local purchases and imports of services destined for use in infrastructure projects.
Neither the measure nor the law, however, established the infrastructure sectors of the economy that could benefit from REIDI. Decree 6,144/07 provides that eligible companies are those private companies with projects in the areas of:
- transportation, including highways, railways, hydroways, urban trains, and ports;
- energy, including generation and transmission of electric power of hydraulic, eolic, nuclear, solar, and thermal origins;
- basic sanitation, including potable water supply and waste management; or
- irrigation.
The Brazilian ministries with jurisdiction over the areas above will review and determine the projects that will be contemplated with the REIDI tax incentives. After determination, the eligible taxpayer must apply for REIDI benefits before the Federal Revenue Department (FRD). If a taxpayer has been granted more than one project, application before the FRD must be made for each project separately.
The FRD will issue an approval number, which must be supplied to all Brazilian suppliers in order for the eligible taxpayer to enjoy REIDI tax incentives (P.I.S. and COFINS suspension). The decree also clarifies that the taxpayer enjoying REIDI incentives (that is, the project holder that acquires goods with P.I.S./COFINS suspension) cannot take P.I.S. and COFINS credits for purchases for the REIDI project.
The FRD will issue further regulations on REIDI application procedures.
David Roberto R. Soares da Silva