Brazilian Congress Fails to Approve Tax Credit for Recyclables

Originally published in the July 14 edition of World Tax Daily (Copyrights Tax Analysts)

An act from the president of Brazil’s Congress states that Provisional Measure 476/2009, which created a presumed federal excise tax (IPI) credit for companies that acquire recyclable materials and substances for use in manufacturing, expired June 1.

Consequently, taxpayers can no longer tax IPI presumed credits upon acquiring solid residues (recyclable materials and substances) for use in their manufacturing processes.

Declaratory Act 23/2010, published in Brazil’s official gazette of July 12, says Provisional Measure 476/2009 expired on June 1 because it did not receive timely approval from Congress.

The consequences of the expiration are unclear since under Brazil’s constitutional system, a provisional measure that expires without formal approval is considered to have never existed.

Congress should issue a decree establishing procedures for those who followed an expired provisional measure while it was in place. In this case, Congress should regulate the tax treatment of those presumed tax credits already taken and used by manufacturers that met all legal requirements under Provisional Measure 476 while it was effective.

The Federal Revenue Department should also issue a regulation establishing the procedures for taxpayers who followed the measure and took presumed IPI tax credits under it.

David Roberto R. Soares da Silva

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