Fiscal Incentives for investors
Fiscal incentives are granted in three spheres of the government: federal, state and municipal.
Federal Fiscal Incentives
The Northeastern Development Superintendence (Sudene) concedes incentives to businesses which are set up in its area of jurisdiction (states in the Northeast, the North of Minas Gerais and the municipalities of the Jequitinhonha Valley / MG and those in the North of Espirito Santo).
The incentives benefit those undertaking implantation projects, modernization, amplification or diversification of enterprises, until 31/12/2013, with a 75% (seventy five percent) reduction in Corporate Income Tax, inclusive of additions, for a period of 10 (ten) years.
Attention:
- The exemption of Importation Tax on capital goods destined for implantation, amplification and refitting of companies may be permitted in enterprises of fundamental interest to national development;
- Tax on permanent assets may be suspended (machinery and equipment, apparatus, instruments, utensils, tools, molds, matrixes and so on) when sent by an industrial establishment to another establishment of the same firm to be used in the industrial process of the receiver and the goods of the permanent assets sent by the industrial establishment, to be used in the industrial process of products ordered by the sender, if they return to the ordering establishment, after a deadline fixed by the fabrication of products.
Source: Legal Guide for Foreign Investors in Pernambuco
State Fiscal Incentives
The Program for the Development of Pernambuco State (Prodepe) is comprised of a collection of fiscal incentives directed towards some sectors of economic activity, including: industrial, distribution centers and wholesale importers. The package is aimed at attracting new investments to Pernambuco and maintaining those that already exist in the state. It is one of the most robust programs of its sort, due to its reach and scheduling of percentages in function of the location of enterprises. It is also among the most transparent as it publicizes its actions through specific decrees in the Diário Oficial, uncommon in programs functioning through state governments in Brazil.
Prodepe was structured to divide the industrial sector into “priority groupings”- agribusiness (except sugar mills); metal-mechanics and transport materials; electric-electronic; non-metallic minerals (except cement and red ceramic); common pharmaceuticals; textiles; plastics; beverages and furniture – and “special industrial groupings” – special pharmaceuticals (only in the pharmaceutical cluster); special automobiles; special steelworks; aluminum sheets and flat glass production (new). Besides these, there are “relevant industrial groupings”, which give incentives to non specified products among those belonging to priority and special industry.
In practice, the incentives last for 12 (twelve) years, with the option of a twelve year extension. They give the right to assumed credit on Operations Tax relative to Goods Circulation and on Installments of Interstate Transport Service Provision and Inter-municipal Communications (ICMS) varying between 75% and 95% of tax owed, assessed in each fiscal period, depending on the Location of the enterprise (MRR: 75%/ Atlantic Forest Zone: 85% / Semi-arid: 90%/ Arid: 95%).
Municipal Fiscal Incentives
Each municipality retains its respective policy regarding investment attraction. The most common municipal incentives include: exemption from Urban Territorial Building Tax (IPTU), for a specified period; a reduction in the rate of Tax on Services (ISS); supply of warehouses, man power and logistic assistance during implantation of the new enterprise.
