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Brazil studies extending incentives to exporters

Posted by Rafael Moro

Image: Pixabay

The Ministry of Economy is studying the extension of drawback licenses for exporting companies for another year. The measure removes or suspends taxes on raw materials or inputs used to manufacture products that will be sold abroad.

In a statement, the folder informed that the restriction of trade flows resulting from the pandemic, which causes a global shortage of items such as chips and certain types of metals, has harmed drawback operations. The problem mainly affects companies whose benefit ends in 2021. If it materializes, it will be the second postponement. In 2020, authorizations had been extended to the end of this year.

"Due to the continuity of the covid-19 pandemic and the consequent setbacks it imposes for the performance of operations linked to the drawback and exemption regimes, the ongoing evaluation at the Ministry of Economy also involves the extension of deadlines concerning the concessionary acts whose validity has been extended based on Provisional Measure No. 960, of April 30, 2020, later converted into Law No. 14.060, of September 23 of the same year," the ministry said.

If there is no extension of the measure, Brazilian industrialists will have to pay R$ 1.2 billion more in taxes this year. This exemption reached 20% of Brazilian exports in 2020, a total of US$ 42 billion. When the study is completed, the request for an extension will be analyzed by the other levels of the federal government.

Drawback was created in 1966 to stimulate Brazilian exports. This incentive complies with international trade rules because current rules stipulate that no country can export taxes, even if they are embedded in the final price of the goods.

In the drawback exemption, the exporter receives definitive exemption for raw materials and inputs used in the manufacture of the goods to be exported. In drawback suspension, taxes are suspended only if the good is sold abroad. If the item is not exported, taxes will be levied on raw materials and inputs.

By: Eliza Maliszewski | Agrolink

This text was automatically translated from Portuguese.