Brazil affirms tax benefit for sales to the free trade zone of Manaus
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Brazil affirms tax benefit for sales to the free trade zone of Manaus

Sponsored by

logo.png
Amazonas - Large

Brazil has affirmed that sales to the Amazonian free trade zone of Manaus must be equal to export transactions. Machado Associados' Ricardo Debatin da Silveira and Rogério Gaspari Coelho discuss the implications for exporters over the last five years.

Brazil’s Superior Court of Justice (STJ), which has the power to deliver final decisions regarding legality (constitutional matters are addressed by the Brazilian Supreme Court – STF), has reaffirmed that sales to the free trade zone of Manaus (FTZM) – which is in the state of Amazonas – must be equal to export transactions. Companies that have sold inputs or merchandise to the FTZM can therefore recover tax credits to foster exports, under the Special Regime for Reintegrating Tax Values for Exporting Companies (REINTEGRA).

The free trade zone of Manaus was established in 1967 to promote the development of Brazil’s inner Amazon region by establishing an industrial, commercial and agricultural hub.

Decree-Law 288/67 set up the FTZM by granting significant tax exemptions and incentives. It set forth that the sale of domestic goods to the FTZM for consumption or manufacturing processes must be equal to foreign trade transactions, for tax purposes. It is important to note that in general, exports from Brazil are exempt from taxes.

The REINTEGRA, originally established by Law 12546/11, grants exporters deemed credits related to the social contributions on gross revenues (PIS and COFINS), which are connected with the sales of products pointed out in Decree 8415/2015. Such PIS and COFINS credits, which range from 0.1% to 3% depending on the type of good and period considered, can be offset with other federal taxes or refunded to taxpayers.

The Federal Revenue Service has historically prevented refunding those credits, and this is largely due to the fact that the National Tax Code notes that exemptions and similar tax reliefs should be literal rather than “indirect exemptions”. The legislation that instituted the tax benefit used the expressions “direct sales to abroad” and “sales to a trading company aiming specifically at exportation”, and this would ultimately not comprise sales to the FTZM.

As a result, taxpayers considered that they had grounds to challenge that stance, and filed lawsuits. The STJ had precedents noting that transactions with the FTZM were equivalent to exports. Recently, the First Panel of the First Section of the STJ reinforced its position in favour of taxpayers by ruling in Special Appeal 1679681-SC (by three votes to two) that the PIS and COFINS deemed credits granted by the REINTEGRA are applicable when sales to the FTZM are performed.

Despite the STJ’s interpretation, the precedents related to this matter are only binding for the parties in the lawsuits, and the Brazilian Federal Revenue Service may still deny the credits in this situation.

Nonetheless, taxpayers can request in court their right to use PIS and COFINS deemed credits in courts regarding their sales for the FTZM in accordance to the REINTEGRA, and to also recover (with interest) such credits related to the past five-years.

Ricardo M. Debatin da Silveira - Small

Ricardo M. Debatin da Silveira

 

Rogerio Gaspari Coelho

Rogério Gaspari Coelho 

This article was written by Ricardo M. Debatin da Silveira (rsilveira@machadoassociados.com.br) and Rogério Gaspari Coelho (rcoelho@machadoassociados.com.br) of Machado Associados.

more across site & bottom lb ros

More from across our site

Despite the relief, Brazil’s government has also presented a bill which seeks to re-impose a tax burden on companies’ payroll, one local tax specialist told ITR
Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
Gift this article