Brazil – New industrial policy launched, includes tax breaks on exports

According to a release from Brazil’s government (August 9, 2011), a new industrial, technological, service and foreign trade policy has been outlined for Brazil. The new measures are to reduce the 20% welfare tax to zero (0%) for sectors that are sensitive to the exchange rate and international competition and which are labor intensive—such as, apparel, footwear, furniture and software.

In addition to payroll tax breaks, the new program (known in English as “Greater Brazil”) establishes a series of initial action ranging from tax breaks on exports, the creation of Reintegra(which pays back to manufactured goods exporters 3% of their export revenue along the same lines as an income tax rebate), to approval of the government purchasing law, the strengthening of commercial defenses, and the creation of special low tax rates for different sectors.

In addition, the industrial policy makes the National Economic and Social Development Bank (BNDES) responsible for financing innovation and investment. One of the main measures in this area is a R$ 2 billion credit line to expand the bank’s innovation portfolio.

The overall strategic guidelines for the Greater Brazil plan and other new measures are expected to be announced in the next few days.