Originally published in the April 8 edition of World Tax Daily (Copyrights Tax Analysts)
Brazil has adopted a decree that extends for another 90 days federal excise tax (IPI) reductions and zero rates for certain vehicles and grants zero rates for some construction materials. Decree 6,809/2009 was published in the official gazette on March 31.
The IPI extensions and reductions were announced by Finance Minister Guido Mantega on March 30. He argued that the IPI reductions for vehicles, originally granted in Decree 6,687/2008 and valid through March 31, were a great success, with the automotive sector experiencing record sales during the period. The automotive sector accounts, directly and indirectly, for 23 percent of the country’s GDP.
Mantega said the government and the automotive sector agreed on the extension of the IPI reduction after the latter agreed not to dismiss any workers for a specified period. The IPI reduction is still temporary — it is valid only through June 30 — and is based on vehicle engines as follows:
- for cars with engines of up to 1,000 cubic centimeters, the IPI is reduced from 7 percent to 0 percent, regardless of fuel type;
- for cars with engines of more than 1,000 cc but not more than 2,000 cc, the IPI is reduced from 13 percent to 6.5 percent for gasoline-powered vehicles, and from 11 percent to 5.5 percent for those with engines that run on both ethanol and gasoline;
- for light pickups with engines of up to 1,000 cc, the IPI is reduced from 8 percent to 1 percent; and
- for light pickups with engines of more than 1,000 cc but not more than 2,000 cc, the IPI is reduced from 8 percent to 4 percent.
Decree 6,809/2009 also provides for a reduction to zero of the IPI applicable to certain construction materials, including cement, paint, varnish, and fixtures such as bathtubs. The zero rate is valid from April 1 through June 30.
David Roberto R. Soares da Silva