Incentive brings taxation of Brazilian companies closer to that of developed countries

The extension of the term of the incentives is provided for in Law 14,547/2023, which allows the deduction of up to 9%, as a presumed credit, from the IRPJ levied on the portion of the actual profit of Brazilian multinational companies with a subsidiary abroad. According to the law, the discount applies to six sectors of the economy: beverage manufacturing; manufacture of food products; construction of buildings and infrastructure works; in addition to other industries in general.

The specialist in tax law Guilherme Di Ferreira explains that the presumed credit is a possibility of discounting the calculation base in the calculation of the tax tribute in the transmission of goods and in the provision of services.

“In practice, instead of paying a tax at each stage, at the entry, at the exit of the product, the provision of services, the company receives a deduction on taxation, based on the presumption of credit, creating there a net value to be paid out. So it is more simplified and with a certain concession of tax discount”, he says.

In addition, the law — originating from Provisional Measure 1148/2022, edited during the government of former President Jair Bolsonaro (PL) — extends the Consolidation of Taxation on Universal Bases (TBU), allowing the parent company in Brazil to investigate the results of its subsidiaries abroad on a consolidated basis. This makes it possible for the loss of one of the subsidiaries to be deducted from the profit calculated by the other, according to a summary produced by the Legislative Consultancy of the Senate.

Economist Hugo Garbe explains that developed countries have more attractive taxes, which increases the competitiveness of their companies abroad.

“The exemption is important to increase the competitiveness of companies that are abroad, to match even the subsidiaries of other companies in developed countries”, he says.

Purpose of the law

Both mechanisms would be extinguished by legal determination at the end of 2022. With the publication of the MP, the deadline was extended until the end of the calendar year of 2024. In the statement of reasons that accompanies the measure, the previous government states that the intention is preserve the competitiveness of Brazilian multinationals.

“In a scenario of economic recovery, the cessation of said mechanisms and, consequently, the imposition of taxation will harm the resumption of Brazilian multinationals and the realization and expansion of investments abroad”, says the document.

Enacted on the last April 13th, law 14,547 passed through the House and Senate without modifications. Congressman Augusto Coutinho (Republicanos-PE) states that increasing the competitiveness of domestic companies is one of Brazil’s main challenges. The parliamentarian defends, however, a balance between collection and exemption to stimulate the growth of Brazilian companies.

“I think this is the equation that parliament often makes and strikes a balance in the sense that there is a point where it does not harm revenue, but also does not penalize companies too much and/or until it becomes easier for them to they have conditions for greater productivity, greater growth and greater job creation”, points out Coutinho.