Originally published in the May 18 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s Senate on May 15 approved four tax-related provisional measures, which were part of the economic and tax package (PAC) launched by President Luiz Inácio Lula da Silva on January 22.
Of the four measures, three will now follow to presidential signature, while one will be submitted again to the House of Representatives because of changes made by the Senate.
Approved first was measure 351, which grants tax incentives for infrastructure projects involving transportation, ports, energy, and sanitation by means of the Special Incentive Regime for Infrastructure Development (REIDI). Under RIEDI, eligible companies may 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. They will also receive P.I.S. and COFINS suspensions for local purchases and imports of services destined for use in infrastructure projects.
Measure 351 will be resubmitted to the House of Representatives because the Senate included a provision that grants special discounts for companies that anticipate payments under special tax payment schedules. The executive branch does not agree with the discount and promised to fight against it in the House of Representatives.
The Senate also approved provisional measure 352 granting a series of tax incentives for digital TV manufacturers in the Digital TV Incentive Program (PATVD). Under PATVD, companies may benefit from a zero rate for the federal excise tax, P.I.S., COFINS, and royalty tax, not only on sales of equipment, but also on purchases of capital goods, technology, and software.
Provisional measure 348 was also approved by the Senate and now follows to presidential signature. The measure creates tax-exempt investment funds for infrastructure projects for individual taxpayers. Income from the funds will be exempt from withholding tax and personal income tax after five years of acquisition by individual investors.
Finally, the Senate approved provisional measure 340/06, which was not originally part of PAC and which adjusts personal income tax brackets at 4.5 percent per year from 2007 through 2010.
David Roberto R. Soares da Silva