Brazil Issues New Regulations on Drawback Regime for Local Purchases, Imports

Brazil Issues New Regulations on Drawback Regime for Local Purchases, Imports

Originally published in the April 6 edition of World Tax Daily (Copyrights Tax Analysts)

Brazil’s Federal Revenue Department and Foreign Trade Secretariat have published a joint ordinance that issues new regulations for the Integrated Drawback Regime (Drawback Intermediário), a drawback regime for local purchases. Joint Ordinance (Portaria Conjunta) 467/2010, published in the official gazette on March 26, revokes prior regulations issued by Joint Ordinance 1/2009.
The ordinance applies to local purchases of materials used in the manufacturing of final products destined for export, including purchases of local agribusiness products, which previously were not eligible for a drawback regime.

Article 1 of the ordinance provides that the import tax (II), the federal excise tax (IPI), the Program for Social Integration contribution (P.I.S.), and the Contribution for the Financing of Social Security (COFINS) will be suspended on acquisitions in domestic markets and on imports of products for the use, consumption, or manufacturing of products destined for export. The previous regulations did not provide for the suspension of II.

Joint Ordinance 467/2010 also extends the tax suspensions to two situations not originally covered by Joint Ordinance No. 01/2009:

  • acquisitions in domestic markets or imports of products for use in repair, raising, cultivation, or extractive activities of a product to be exported; and
  • acquisitions in domestic markets or imports of products carried out by the so-called intermediate manufacturers for the manufacture of intermediate products to be supplied to exporters in charge of the manufacture of a final product destined to export.

Joint Ordinance 467/2010 clarifies that the tax suspensions do not apply to some transactions not directly related to an export, such as payments for rental and lease of buildings, machinery and equipment, acquisitions of capital goods to be incorporated into the taxpayer’s fixed assets, and electricity.

The ordinance also regulates the licensing of taxpayers to operate under the integrated drawback regime and establishes controls to verify compliance with the applicable rules and regulations. It will become effective 30 days after its publication in the official gazette (April 25).

David Roberto R. Soares da Silva