1. Preferential policy framework



The Brazilian government actively encourages foreign enterprises to invest in Brazil in order to promote the modernization of domestic industries, develop the land and natural resources, solve the domestic employment problem and increase the government's fiscal revenue. Its main preferential policy frameworks include: national treatment for foreign investors; Giving preferential tax treatment to foreign investment; Foreign-invested enterprises can apply to the Brazilian government for export credit and insurance for products manufactured in Brazil and exported to a third country.







2. Industry encouragement policies



According to Brazil's plan to encourage port investment, the Brazilian government exempted port machinery and equipment from industrial product tax, social integration tax, social security tax, etc. Port machinery and equipment not produced in this country can be exempted from import duties. The incentives are valid until December 2010.



Industrial products such as capital products and software products are exempt from taxes. Specific products involve: agricultural tractors, steam boiler parts, steam turbine parts, pump parts, non-electric industrial or laboratory furnaces, leather production machines, metallurgy, coking, casting machinery and other 14 kinds of capital products; Master CDS or DVDS (excluding audio and video products and other software) of software used in information processors; A machine for making invoices.







3. Regional encouragement policies



To encourage the development of the north and North-East, the federal and local governments are exempt from corporate income tax for 10 years on foreign investment (which must be joint ventures with large Brazilian shares) and 50 per cent for five years from the 11th; Exemption or reduction of import duties and duties on manufactured goods; Exemption or reduction of local taxes such as commodity circulation and services Tax.



Brazil's main ports are Santos, Rio DE Janeiro, Paranagua, Recife and Victoria. Brazil has set up various forms of free zones at these ports, such as free ports, free trade zones, bonded warehouses and transit zones. Better known is the Manaus Free Zone.



The Manaus Free Zone, established by the Federal Government of Brazil for the development of the northern region, enjoys special preferential policies. The approval and administration of these preferential policies are the responsibility of the Manaus Free Zone Authority, the Amazon Development Agency, the Amazonian State and the Municipal Government. For example, the Manaus Free Zone Authority may approve and administer preferential policies in terms of import duties, duties on industrial products and export duties, and establish export incentive schemes in the Western Amazon region. Amazon Development has preferential policies on income tax, state government on GST, and municipal government on urban real estate tax, public health tax and business license tax. The preferential policies of the Manaus Free Zone Authority include:



(1) Import duties: All imported goods (including capital products) used for consumption in the Free zone of Manaus are exempt from import duties; Goods for consumption in the western Amazon region (including parra, Rondonia, Acree, Roraima, etc.) and listed in Joint Ministerial Decree No. 300 of 20 December 1996 are free of import duties; (3) For the import of raw and auxiliary materials and components and assemblies used in the assembly and processing of enterprises in the Industrial area of Manaus, when the final products are sold to other areas within the territory of Brazil, the import tax will be reduced by 88% (to enjoy this preference requires prior approval); (4) Reduction of import duties of relevant parts that need to be imported during the production of information products; (5) Reduce the import duties of relevant parts that need to be imported during the production of vehicles.



(2) Duty on industrial products: All finished products produced in the Industrial zone of Manaus are exempted from duty; For consumption in the western Amazon region (including parra, Rondonia, Acree, Roraima, etc.) and listed in Joint Ministerial Order No. 300 of 20 December 1996; Other domestic products entering the Industrial area of Manaus and the western Amazon region are exempted; (4) In the western Amazon region (including Pala, Rondonia, Acre, Roraima and other states) using local agricultural and forestry resources as raw materials to produce products exempt.



(3) Export tax: All products produced in the Industrial zone of Manaus are exempt from export tax.



(4) Export Encouragement Program in the Western Amazon region: This program aims to encourage the use of local human resources to generate foreign exchange for the country by importing raw and auxiliary materials and assembling parts for processing and re-exporting in the Western Amazon region. The scheme offers the following benefits: (1) import duty, duty on industrial products and duty on commodity circulation services are free of charge and free of all formalities in all government departments; (2) Import quota reward, that is, can apply for the import quota beyond the quota; No need to submit the basic production process.



[Preferential policies of AMAZON Development Administration] mainly focus on income tax. Currently, all foreign companies investing in the Industrial zone in Manaus are exempt from income tax. But the policy was always opposed by the southern states. Therefore, for future investments, Manaus is no longer exempt from income tax and can only be reduced in the following proportion:



(1) By 2003, the income tax will be reduced by 75% on projects that have been approved for the establishment of new industries, agriculture, animal husbandry and basic services (the special treatment will remain unchanged for projects that have been approved previously).



(2) From 2004 to 2008, a 50% reduction will be imposed on projects submitted for approval for expansion, reconstruction and increase of product production.



(3) From 2009 to 2013, 25% reduction will be imposed on projects submitted for approval for expansion, reconstruction and increase of product production. Loans for technology modification are made to companies through the Fundo De InvestimentoDa Amagoniafinam.



[Preferential Policies of amazonas State Government] Amazonas State Government implements preferential policies for the reduction and exemption of commodity circulation service tax, specifically including:



(1) All goods produced in other States of Brazil and sold in the Free zone of Manaus are free of charge.



(2) The following percentage reductions are applied to goods produced in the Manaus Free Zone: 45 per cent for consumer goods, 55-85 per cent for capital goods, machinery, food, clothing, footwear and vehicles, and up to 100 per cent for semi-finished goods, medicines produced using local natural resources, fish by-products and goods produced in the interior of the Amazonia state.



(3) Goods imported through the Manaus Free zone by enterprises in other Brazilian states are exempted. Sao Paulo importers imports from the United States, for example, if pass the import of manaus, corridor (i.e., manaus free zone), in manaus, tax clearance when the government only to the amazon, 6% of the import commodity circulation service taxes, if without manaus, the Sao Paulo imports, then the importer to pay 18% of commodity circulation service tax in Sao Paulo.



[Preferential policies of the municipal government] Urban real estate tax is exempted for 10 years, public health tax is exempted for 10 years, and business license tax is exempted for 10 years.







4. Preferential policies for small and medium-sized enterprises



To encourage smes, the Federal Government of Brazil offers three tax incentives:



"Simples" requires an annual turnover of r $1.2 million and all foreign shareholders must have a permanent residence permit in Brazil. The collection standards of the simple tax rate are as follows:

Table 3-2: Summary tax rates for Small and medium-sized enterprises in Brazil

Source: Compiled in accordance with existing Brazilian tax regulations







(Suppose a profit requires an annual turnover of R $48m, and no restriction on permanent Brazilian residence permits for all shareholders. The collection standard is based on the turnover of the company, and the tax rate will be levied on a monthly basis. The amount collected will be calculated according to the following tax rates: Social integration tax, 0.65%; Social Security fee, 3.00%; Enterprise income tax, 1.20%; Corporate profits (tax), 1.08%. When calculating enterprise income tax, if the turnover exceeds 250,000 reais, the enterprise income tax of that month will be levied 10% tax.







[Lucro Real] Companies with an annual turnover of r $48 million or more may apply this preferential tax rate at their option, without the restriction that all shareholders must have a permanent Residence permit in Brazil.



The social integration tax and social security fee are calculated based on the monthly turnover of the company, and the corporate income tax and corporate profit tax are calculated based on the quarterly (three-month) net profit. The tax rate is as follows: Social integration tax, 1.65%; Social Security fee, 7.60%; Enterprise income tax, 15.00%; Corporate profit tax, 9.00%. In calculating the corporate income tax, if the net profit for the month exceeds R $20,000, the corporate income tax for that month will be taxed at 10%.