Tax reform: new system will exempt exports from taxes

The exemption of exports in Brazil is “something for the English to see”, as the popular saying goes. Although it is provided for in the legislation, the exemption of taxes on sales by national companies to other countries does not occur in practice. The problem, however, is numbered, due to the tax reform.

The superintendent of Economics at the National Confederation of Industry (CNI), Mário Sérgio Telles, explains that the tax relief for exports remains only in theory due to some distortions in the current tax system. The first of these is cumulativity.

“Throughout the production chain, it is very common for a supplier to pay a tax and the company that is buying from that supplier is not entitled to credit the tax that was paid by the supplier. This happens, for example, with the ISS. So, every company that provides a service to an exporting company, for example, pays the ISS, and the exporting company is not entitled to recover the tax that was paid. Because of this tax residue, it is impossible to truly reduce the burden on exports,” he points out.

As if it were not enough for exporting companies to be unable to recover credits for some taxes paid throughout the production chain, such as ISS, when they prove their right to reimbursement, they often take a long time to receive the refund, says Telles.

“Because they have a debt and zero tax incidence on their sales, exporters tend to accumulate credit balances, that is, the tax that their suppliers paid is greater than the debt that they have on their sales. What happens is that the tax authorities, whether federal or state, do not refund these credit balances. At the moment, we have around R$50 billion in PIS/Cofins credits with the Federal Revenue Service to be returned. And estimates indicate around R$170 billion in ICMS credits that the states do not return,” he says.

What changes?

Under the new system, exports will be exempt from the Contribution on Goods and Services (CBS) — which replaces IPI, PIS and Cofins — and from the Tax on Goods and Services (IBS) — which replaces ICMS and ISS. Furthermore, with full non-cumulativeness, Brazilian companies that sell to other countries will be able to appropriate and use the credits from taxes collected by their suppliers.

“All taxes paid by the supplier will entitle the buyer to credit, and there is a provision for the return of credit balances. In most cases, within 75 days, for companies”, explains Telles.

Rapporteur of Complementary Bill (PLP) 68/2024 in the Chamber of Deputies, federal deputy Reginaldo Lopes (PT-MG) says that the new regime brings Brazil into line with the internationally recommended practice of not taxing exports, which will give Brazilian companies a competitive edge in the foreign market.

“Brazil will not tax and will return the credit. It will reduce costs. You will export without tax and all tax residue from previous chains will be returned. If the chain is short, (it is projected) an 8% productivity gain. If the chain is long, up to 16%,” he says.

Processing

After passing through the Chamber of Deputies, the proposal detailing how the new tax system will work will go to the Senate.

Tax reform: credit refund will depend on payment of tax in previous stages

Production sector suggests correction of text regulating tax reform

Tax reform: end of cumulativity and tax war between states