On 5 September 2022, the Brazilian government approved Law 14440/2022, which, by amending Law 11945/2009, authorises the inclusion of certain services in the suspension drawback regime as from 1 January 2023.
The drawback customs regime aims to boost the export of Brazilian manufactured products by exempting the acquisition of inputs or refunding customs duties, which thus reduces the manufacturing costs. As a rule, the legal system provides for three types of drawbacks: suspension, exemption, and refund.
The suspension drawback allows the suspension of the payment of Import Duty (II), Exercise Tax (IPI), Social Contribution on Revenues (PIS and COFINS), Social Contribution on imports of goods and services (PIS-Import and COFINS-Import), whether or not combined with the acquisition, in the domestic market, of goods to be used or consumed in the manufacturing of the product to be exported. A State VAT (ICMS) exemption also applies, but only to imports.
As for the exemption drawback, it allows the exemption from the II and the reduction of IPI, PIS, COFINS, PIS/PASEP-Import and COFINS-Import on imports to zero, whether or not combined with the local acquisition of goods equivalent to those used or consumed in the manufacturing of the exported product.
Finally, in the refund drawback, the total or partial refund of the taxes paid on the import of inputs used in the manufacturing of goods exported, or used in the manufacturing, complementation or packaging of another product that is exported is allowed. Due to the broader scope of the benefits granted by the other two modalities, the drawback refund is generally not used anymore.
As can be seen, the three main drawback modalities seek to relieve the acquisition costs of goods to be used or consumed in the manufacturing of products that are to be exported. No reference is made to services required for completing the exports.
With the changes brought by Law 11440/2022, as from 1 January 2023, it will be possible to acquire services, in the domestic market and upon import, directly and exclusively linked to the export of products resulting from the use of the drawback regime, with the suspension of the PIS, COFINS, PIS-Import and COFINS-Import.
The suspension of PIS/COFINS and of PIS/COFINS-Import will apply, among other things, to: (i) intermediation in the distribution of goods abroad; (ii) cargo insurance; (iii) customs clearance; (iv) storage of goods; (v) road, rail, air, waterway, or multimodal cargo transportation; (vi) cargo and container handling; (vii) freight forwarding services. Furthermore, the Executive Branch may provide for its application to other services associated with exported products.
This measure will reduce the tax burden on export-related services, which account for 35.7% of the value added to Brazilian exports of manufactured goods, according to the Organization for Economic Cooperation and Development (OECD). Thus, it is expected to further reduce the export costs of Brazilian manufactured products and so boost the economic recovery following the Covid-19 pandemic.
To make the new law operational, the Federal Government will issue an ordinance regulating the criteria for granting, using, monitoring, and inspecting the drawback suspension regime for services, and will provide for adjustments on the drawback systems.
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