September 21 2011
In August 2011 the federal government and the Ministry of Development, Industry and Commerce launched the Plano Brasil Maior, a set of measures intended to reduce the tax burden of certain industry sectors. The plan aims to increase the competitiveness of Brazilian industry, on both the domestic and foreign markets, by stimulating technological innovation and increasing the value of national assets and services.
In order to deal with the uncertainty created by the global financial crisis and to strengthen domestic industry by reducing the tax burden of certain sectors, the government is seeking to guarantee competitiveness in domestic industry and to generate new jobs and income.
A key measure established in the plan through Provisional Executive Act 540/11 is the reduction of the rate of employer social security contributions, as provided for in Article 22 of Law 8.212/91. According to Act 540/11, the clothing, footwear, furniture and software sectors will benefit from a substantial decrease in social security contributions, as they are characterised by huge workforces and are suffering competitively.
The furniture, clothing and footwear industries will benefit from a 18.5% reduction in employer social security contribution as the basis for calculation has been amended. Previously, contributions were calculated based on 20% above the total amount of remuneration paid by the company; the new basis will be 1.5% above the gross revenue earned by the company in the course of its activities (not including cancelled sales and unconditional discounts).
For the technology and software industries, the contribution rate will be 2.5% above the gross revenue earned by the company in the course of its activities (not including cancelled sales and unconditional discounts).
The modifications introduced by the act will apply from December 1 2011 to December 31 2012. Through this significant reduction in the tax burden of domestic industry, the government hopes to attract foreign investors and expand local manufacturing activities, thus generating new sources of income and funding for social security.
Although the plan targets only selected industries, the government intends to expand the reduction to other sectors in due course.
Following an economic crisis, it is vital to strengthen production chains and to protect local industry from the abusive commercial practices of foreign companies, as well as investing in a skilled workforce. These are the goals that the government hopes to achieve through these new fiscal incentives.
For further information on this topic please contact Cristian Baldani or Isa Soter at Veirano Advogados by telephone (+55 21 3824 4747), fax (+55 21 2262 4247) or email (email@example.com or firstname.lastname@example.org).
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