REINTEGRA: Re-establishment of the Brazilian special regime for the reinstatement of taxes for exporters

The REINTEGRA was created by Provisional Measure 540/2011, later turned into law 12546/2011, as part of Plano Brasil Maior (Bigger Brazil Plan).

In accordance with article 3, I, of Law 12546/2011 (amended by Law 12844/2013), this special regime was applicable to export transactions performed up to December 31 2013. However, the MP 651/2014 has re-established the REINTEGRA on a permanent basis.

The idea behind the creation of the REINTEGRA was to reduce the tax burden on the goods exported by Brazilian manufacturers to increase their competitiveness on the international market.

High tax burden for exporters

One of the main difficulties found by Brazilian companies on the international market is the high tax burden in Brazil, which elevates the production costs and the prices of Brazilian products. Therefore, reducing tax costs in production seems to be one of the main mechanisms to ensure competitiveness for the Brazilian industries.

Even the exports being immune from taxation, the prices of the exported goods produced in Brazil are still heavily burdened, due to residual costs of taxes paid along the production chain and that have not been offset by the companies.

Therefore, the REINTEGRA was created with the purpose of recovering the amounts referring to the residual tax costs existing in the industries’ productions chains, reducing the tax burden on such production.

In accordance with article 22, paragraph 1, of the MP 651/2014, the amount to be ascertained for the purposes of refund shall be calculated upon applying a percentage that may vary from 0.1% to 3% on the revenue arising from the export, depending on the exported good. This percentage will be established by an ordinance the Brazilian Ministry of Finance will issue.

Given that said percentage will be established by product, and not considering the concrete situation of each company, the main criticism about the REINTEGRA is that, except for coincidences, the tax refund will not match the tax costs actually borne by the Brazilian company. However, the establishment of fixed percentages by product makes the REINTEGRA much simpler, in comparison with a special regime in which the companies should prove the taxes effectively borne.

It is important to mention that the amount ascertained at REINTEGRA will be considered as credits of Social Contributions on Gross Revenues (PIS and COFINS) and, therefore, the exporting legal entity will be able to use this amount to, at its discretion:

• request its reimbursement in cash, under the terms and conditions established by the Brazilian Federal Revenue Service; or

• carry out the offsetting against its own debits – due or coming due – referring to taxes administered by the Brazilian Federal Revenue Service, under the specific legislation applied to the matter.

Please note that, in compliance with article 22, paragraph 5, of MP 651/2014, credits ascertained at REINTEGRA are subject neither to the PIS/COFINS, nor to any corporate taxes (Corporate Income Tax – IRPJ – and Social Contribution on Net Profit – CSLL).

We should stress that MP 651/2014 ruled that the re-establishment of REINTEGRA would produce effects only after the Brazilian Ministry of Finance issues the ordinance defining the percentage of refund for each exported product. However, so far, it has not done so.

Ricardo Marletti Debatin da Silveira (rsilveira@machadoassociados.com.br) and

Sérgio Villanova Vasconcelos (svillanova@machadoassociados.com.br), members of Machado Associados, the principal Brazilian correspondents of the Indirect Tax channel of www.internationaltaxreview.com