The Brazilian government has established the Route 2030
Programme – Mobility and Logistics by means of
provisional measure (MP) 843/2018, aimed at encouraging
technological and energy efficiency in the Brazilian automotive
sector.
The programme succeeds the Inovar-Auto, another tax
incentive programme that expired on December 31 2017, which was
very relevant to the automotive industry in Brazil.
The new programme has been designed to foster innovation,
technological development, competitiveness, vehicle security,
environmental protection, and energy efficiency, and the
quality of cars, trucks, buses, chassis with engines, and auto
parts.
From January 1 2019 to December 31 2023, companies
manufacturing or selling vehicles falling under positions 87.01
to 87.06 of the excise tax rates table (TIPI, which is based on
a harmonised system), or auto parts and strategic systems for
the production of such vehicles, may deduct, when calculating
corporate income tax (IRPJ) and the social contribution on net
profits (CSLL), operating expenses incurred in research and
development (R&D) in Brazil, provided that they meet
certain requirements and are accredited by the Ministry of
Industry and Foreign Trade and Services (MDIC).
The MP also establishes requirements for the sale, in
Brazil, of vehicles in the same TIPI positions, and provides
for a 'regime of auto parts not manufactured’
domestically.
As of 2022, the executive branch may reduce IPI rates by up
to 2% for vehicles that meet specific energy efficiency
requirements, and by up to 1% for vehicles meeting specific
structural performance requirements associated with assistive
steering technologies (provided that energy efficiency
requirements are also met). The reductions, which are
non-cumulative and limited to 2%, apply to both domestic and
imported vehicles.
Concerning the regime of auto parts not manufactured, those
entitled to benefit from this regime will be granted, as of
January 1 2019, exemption from import duty on 'parts,
components, assemblies and sub-assemblies, finished and
semi-finished and pneumatic components’, new and
without equivalent domestic production capacity, intended for
the manufacturing of automotive products. The accreditation
requirements and Mercosur common nomenclature (NCM/HS) codes to
be exempt will be regulated by the executive branch.
The regime for auto parts not manufactured will include
products imported directly or on behalf of beneficiaries, which
must be applied in the manufacturing of automotive products
within three years of the taxable event. Moreover, this
exemption is conditional upon the application of 2% of the
product’s customs value in R&D projects in the
country.
The MP was enacted on July 5 2018, and its validity was
extended by the National Congress for more than 60 days on
September 5 2018, during which period it must be approved to be
incorporated into law (or otherwise amended or rejected). It
must also be regulated by the executive branch, which must
enact a decree to address these guidelines in detail.
The executive branch also edited decree 9442/2018, reducing
the IPI rate of vehicles equipped with hybrid and electric
motors, depending on the capacity of their engine and on their
energy efficiency. The reduction, valid from November 10 2018,
covers vehicles falling under determined NCM/SH tax codes
related to ethanol fuel engines, flexible fuel engines, hybrid
engines, and electric engines.
These new tax incentives are important for the automotive
sector and for Brazil, which usually champions the use of clean
energy, to move to a greener fleet.
This article was prepared by Ricardo Marletti Debatin da
Silveira (rsilveira@machadoassociados.com.br)
and Rogério Gaspari Coelho (rcoelho@machadoassociados.com.br),
members of Machado Associados’ indirect tax team.