• Brazilian tax treatment of exports

    By Hugo Reis Dias

    11-10-2018

    Brazil is, since decades, holder of notorious potential for commodities exports, in special in the farming sector.

    It was capable of achieving, in the last decade, the post of third biggest exporter of farming products, occupying even more enviable positions in specific sectors, such as in the exportation of cotton (second biggest exporter, behind only USA) and bovine meat (currently the biggest exporter in the world).

    Not only Brazil occupies – many times, handily – the position of one of the largest exporters of diverse commodities, it presented, despite all the economical and political crises that affected the nation, significant exports growth during the year of 2017.

    According to the World Trade Organization (WTO), Brazil had the 6th bigger growth in foreign sales among the thirty greatest world exporters, registering a growth significantly larger than the average one – Brazil registered a 17,5% growth in its exports, whereas the world average was only at 10,6%.

    In the same year, Brazil surpassed Kuwait in petrol exportation, taking over its place as the 9th biggest petrol exporter of the world, which resulted in speculations that until 2026 the country will already have taken over the position of 5th biggest petrol exporter.

    Although it is true that the proportions of the country, and its geography, contributes for the country’s hold of a big share of the exports in the world, it is also true that the nation’s fiscal treatment for exports cannot be disregarded.

    Those operations, as one would imagine, receive extremely beneficial fiscal treatment, which many times arise from the Federal Constitution itself, which establishes tax immunity for numerous operations related to exports.

    It is the case, for instance, of the Tax on Manufactured Products (IPI): its incidence on exportations is constitutionally forbidden.

    The same can be said about some Social Contributions (taxes destined to the funding of specific state activities, such as the funding of the social security system), for its incidence on income prompted by exportations is also prohibited.

    Even the Tax over Exportations, created specifically to tax those operations, had its incidence restricted by the Executive, only burdening, nowadays, some products, such as weapons and ammunition.

    It must be noted, also, that, for most of the taxes, the benefits expand well over the mere export operation.

    It is the case of the ICMS, a tax that burdens the circulation of products and services, and that, by constitutional determination, cannot burden not only the export operation, but also the international freight, and, as the Brazilian Superior Court of Justice is now interpreting, the inland freight as well, if the product is destined to an export operation.

    In what regards the IPI, it is also possible that the taxpayer opt for a suspension of said tax incident over the supplies acquired for its production line. In this case, the taxpayer will not only be exempted of paying said tax when shipping the final product for a foreign country, it will also be exempted of paying it when acquiring supplies (such as components and packages), for its production line.

    The taxing of the export operations, in the case of a company, ends up being restricted to the Income Tax (IRPJ) and The Social Contribution on Net Income (which, although is a Social Contribution, burdens the net income, and not the income, per se, therefore dodging the constitutional immunity).

    Even with some (very low) degree of tax burden over the export operations, there are even more benefits existent in Brazil, such as several especial regimens of taxing.

    For instance, there is the Especial Tax Values Reintegration Regimen for Exporters (REINTEGRA), which entails the possibility of calculating tax credits by applying determined percentage on the income from export operations – tax credits that can, thereafter, be utilized as “payment” for other taxes owed by the exporter.

    Another important regimen is the DRAWBACK Regimen, which allows the suspension, exemption or refund of taxes burdening the supplies acquired in the national and international market. It allows the exporter to take advantage of either a suspension, exemption or refund of the taxes that were/should have been paid when acquiring said supplies, if the final product is destined to an export operation.

    It is noticeable, thus, that Brazil has an extensive policy of guaranteeing tax benefits for the tax payers that are engaged with exportations, that makes the country a great environment for the development of export activities – which is justifiable, for exportations represents a significant portion of the nation’s gross domestic product (GDP).

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  • The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.

Hugo Reis Dias

Professor, Attorney and Legal Adviser based in Belo Horizonte, Minas Gerais. Attending Masters Degree in Public Law, Specialization degree in Tax Law and Law graduate from Pontifical Catholic University of Minas Gerais (PUC/MG). Experience as attorney and legal adviser in the area of Corporate Law, with a focus in Tax Law. Experience with international legal practice at Trowers and Hamlins’ tax team, based in London. Post-graduation professor at IEC – PUC/MG (Tax Law). Post-graduation professor at “Centro de Atualização em Direito Tributário – CAD” (Upgrade Center in Tax Law). Post-graduation professor at “Escola Superior de Advocacia – ESA da Ordem dos Advogados do Brasil” (Lawyer’s Superior School of the Brazilian Bar Association). Chief-Counselor of Três Corações’ Municipal Taxpayers Board. Member of the Brazilian Association of Tax Law (ABRADT) and Tax Law Committee of the Brazilian Bar Association’s Minas Gerais Section.

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