Provisional Measure No. 601/12 - Amendments To Tax Legislation

Provisional Measure ("MP") no. 601 was published on December 28, 2012, amending a number of tax incentives for 2013, as well as altering and regulating on measures related to the development and industrial policy plan called "Brasil Maior" (Greater Brazil), created by the government recently.

As the mentioned MP encompasses several topics, the tax changes will be analyzed per topic, as follows:

Special System of Reinstatement of Tax Amounts for Exporting Companies ("REINTEGRA") - Extension of Term REINTEGRA, created by Provisional Measure no. 540/2011 as part of the Brasil Maior plan and aimed at reinstating amounts relative to residual tax costs existing in the production chain of exporting companies, was extended until Dec. 31, 2013.

Thus, the producing entities exporting goods manufactured throughout 2013 may compute amounts with the purpose of reimbursing, partially or fully, any tax residue existing in their productive chain.

In this regard, it should be mentioned that the amount to be reimbursed to the exporting companies will be set by the Executive Branch, and may vary from 0% (zero percent) to 3% (three percent) on the revenue deriving from the export of produced goods.

Payroll Release - Extension of the list of sectors included Another measure in connection with the "Brasil Maior" plan was the release of payroll granted to legal entities of specific sectors (IT, furniture, shoes, textile, and leather), through the creation of a percentage of the social security contribution on the gross revenue ("CPRB"), substituting the social security contributions established in article 22 of Law no. 8,212/91.

Along these lines, MP no. 601/2012 extended the sectors comprised by this new system, so that among the legal entities that are also to apply the new tax rate 1% (one percent) relative to the CPRB, we have retail businesses1 and companies engaged in the maintenance and repair of vessels.

Furthermore, the MP excluded international airline companies of foreign association of countries that establish, under reciprocal treatment, tax exemption of the revenues generated by Brazilian airline companies, from the CPRB benefit.

Nevertheless, the MP also altered the revenues that can be excluded from the CPRB basis, so that, in addition to the export revenues, revenues arising from the international cargo transportation may be excluded from the CPRB basis.

Thereafter, the MP set forth that in the case of hiring of companies for the performance of...