Originally published in the September 29 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s Federal Revenue Department (FRD) has finally issued regulations for a long-awaited export regime that suspends some taxes for Brazilian exporters that purchase materials in domestic markets for further manufacturing and export. The new regime will be available to exporters as of October 1.
Joint Ordinance 1,460/2008, issued by the FRD and the Foreign Trade Secretariat, was published in Brazil’s official gazette on September 19. The ordinance regulates the drawback verde e amarelo, or green and yellow drawback regime, which is in reference to the colors of the Brazilian flag.
The regime allows exporters to purchase materials in Brazilian markets without paying the federal excise tax (IPI), P.I.S. (the Program for Social Integration contribution), and COFINS (the Contribution for the Financing of Social Security). As a condition for the tax suspension, the materials must be subject to manufacturing and be later exported.
The domestic drawback regime was originally created by article 3 of Law 8,402/92 and Decree 541/1992, but was revoked a few years later by Decree 2,637/1998. In late 2003, article 59, paragraph 1 of Law 10,833/2003 brought the domestic drawback back to life, but on the condition that the FRD issue additional regulations.
The first regulation was issued in Normative Instruction 845/2008, but the regime could not be fully applied without a second regulation on the application process. That second regulation, Joint Ordinance 1,460/2008, includes guidance on the following:
- jurisdiction to grant drawback authorization;
- application for the regime through the import/export electronic system;
- conditions for authorization;
- requirements for the admission of goods under the regime; and
- FRD access to the relevant data.
David Roberto R. Soares da Silva