In The Wake Of WTO Decision, Brazil Changes Tax Incentives For Information Technology, Communications And Semiconductor Products

At the end of last year Law 13,969 was published, regulating the industrial policy for the sectors of information technology and communications (ITC), as well as semiconductors, changing the legislation in force since the 90's.

In general terms, the new legislation, which will be in force, as of April this year, for the next ten years, replaces the IPI incentives for ITC products and the PIS and COFINS incentives for the semiconductor products, which were invalidated by WTO, for financial credits which correspond to certain multiples of the expenses of the companies with activities of research, development and innovation. The resulting credit is limited to certain percentages of the gross revenues in the domestic market derived from the sales of ITC products defined in the legislation, produced in accordance with the respective PPBs (Basic Productive Processes). These percentages vary between 13.65% and 9.56%, depending on the location of the company, origin of the technology and period to which the benefit refers.

The same gross revenues will be the basis for the consideration required from the companies enjoying the benefits, which corresponds to investments in activities of research, development and innovation of at least 4% of that basis, a portion of which necessarily directed to investments specified in the law (agreements with scientific institutions, contributions to FNDCT - a federal development fund, and investments in programs and projects of national interest, as defined by the competent Ministry).

There is still an alternative system to determine the financial credits, based on...