Originally published in the January 6 edition of World Tax Daily (Copyrights Tax Analysts)
Provisional Measure 476/09, which grants a presumed federal excise tax (IPI) credit for companies that acquire solid residues (recyclable materials and substances) for use in manufacturing, was published in Brazil’s official gazette on December 24. All recyclables eligible for the tax credit will be listed in a forthcoming presidential decree.
The presumed tax credit, effective until December 31, 2014, is available only to manufacturers, meaning that the mere trading of recyclables will not generate an IPI credit.
Furthermore, Provisional Measure 476/09 limits a taxpayer’s ability to use the presumed credit. Article 2 of the measure states that the new presumed IPI credit:
- shall be used exclusively to deduct IPI liabilities arising from outputs of goods that contain solid residues in their composition;
- cannot be used if the final product (which contains solid residues) is eligible for an IPI suspension, exemption, or tax immunity;
- can be used only if solid residues are acquired directly from recyclable cooperatives as regulated by the executive branch; and
- will be calculated by the taxpayer by applying the IPI tax rate applicable to the final product, up to as much as 50 percent of the value of the solid residues acquired by the taxpayer (to be further regulated by the executive branch).
The presumed tax credit will become effective as soon as the executive branch issues the necessary regulations.
David Roberto R. Soares da Silva