Brazil’s Revenue Department published Interpretative Declaratory Act (ADI) 26/08) on the characterization of industrial activities under contract manufacturing arrangements for purposes of corporate income tax and the 9 percent social contribution on net income (CSL) under the presumed income tax calculation regime (lucro presumido). The Act came a few months after the Revenue Department had revised its prior interpretation (ADI 20/07) on the subject, which resulted in increase of tax burden in certain circumstances. ADI 26/08 revokes ADI 20/07 and establishes a new definition to characterize contract manufacturing as an industrial activity subject to the presumed tax basis of 8 percent. Taxpayers falling within the situation described in former ADI 20/07 will no longer be subject to additional income tax or CSL.
20May 2008