Originally published in the April 10 edition of World Tax Daily (Copyrights Tax Analysts)
Brazil’s Federal Revenue Department and Foreign Trade Secretariat have published a joint ordinance that regulates a long-awaited drawback regime for local purchases.
The new regime introduced in Joint Ordinance (Portaria Conjunta) 01/2009 (published in the official gazette on April 2) will apply 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 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.
Foreign Trade Secretary Welber Barral said the new integrated drawback regime applies to all companies but will especially benefit the agribusiness sector, which has contributed significantly to Brazil’s trade balance but until now could not receive export tax breaks unless sales were made directly abroad (direct export). Local supplies of agribusiness products used in the manufacturing of final products destined for sale abroad were subject to local taxes, which ultimately increased the sales price of the exported merchandise. The new integrated drawback regime seeks to eliminate that burden and reduce the sales prices of local products.
Joint Ordinance 01/2009 establishes general regulations for the new drawback regime, which will become effective 45 days after its publication in the official gazette (May 17). Until then, both the Federal Revenue Department and the Foreign Trade Secretariat will issue new regulations within their jurisdictions.
David Roberto R. Soares da Silva