IP And Tax Incentives For Innovation: Tools To Maximize Investments In R&D

• Published date: 18 September 2020
• Subject Matter: Intellectual Property, Tax, Patent, Trademark, Income Tax
• Law Firm: Venturini IP
• Author: Mr Louis Lozouet

1. The framework of innovation in Brazil

The purpose of this article is to show that tax incentive policies fostering innovation and the Intellectual Property (IP) system complement each other and together could be used more efficiently in order to boost R&D in Brazil.

Brazil still appears in median positions in innovation rankings The Global Innovation Index 2020 listed Brazil in the 62nd position - out of 131 countries.

However, such ranking does not reflect the technical quality of Brazilian research institutions or the volume and quality of scientific publications and does not illustrate the relevance of Brazilian research contributions in areas such as health and agricultural sciences.

Given this context, in order to strengthen the Brazilian innovation system, a regulatory framework to stimulate R&D activities was created over the past 20 years, including the following provisions:

• Law #10,973/04 dealing with Science, Technology and Innovation (amended by Law #13,243/16 and Regulatory Decree #9,283/18), aimed at reducing bureaucracy and expanding collaboration between the private sector and academic institutions.
• Law #2,433/88, which for the first time regulated the grant of tax incentives to companies that invested in technological R&D programs. The benefits of this law were expanded in 1993 (Law #8,661/93) to technological development programs in agriculture, in addition to introducing the possibility of deductions from income tax expenditures with the acquisition of intangible assets for R&D.
• Law #11,196/05 (known as "Lei do Bem") which allows for the grant of tax incentives to legal entities that carry out R&D of technological innovation, is the law that brought the greatest impact.
• Financial instruments, such as the compulsory investment obligations in R&D of regulatory agencies (e.g., the National Electric Energy Agency - ANEEL and National Petroleum Agency - ANP).
• Governmental development agencies were created as the country gained maturity and economic stability (e.g. the National Bank for Economic and Social Development - BNDES and the Funding Authority for Studies and Projects - FINEP).
• Entities such as the Brazilian Industrial Research and Innovation Company (EMBRAPII), founded in 2013 and the Brazilian Industrial Development Agency (ABDI) founded in 2004, to name a few, were also created, each with its own function.
• Private sector initiatives, which, through venture capital and direct investment tools, contribute to foster innovation...