Government reduces tax on products manufactured in Brazil

A decree (Decree No. 11158) published by the federal government last Friday, July 29, establishes the items manufactured in Brazil for which the 35% reduction in the Tax on Industrialized Products (IPI) will be valid.

The decree also excludes from the list the main products that are manufactured in the Manaus Free Trade Zone.

According to the government, the decree complies with a court decision (ADI 7153) that determined the preservation of the competitiveness of products produced in the Free Trade Zone.

According to the Ministry of Economy, the decree provides legal security for the IPI reduction.

“By detailing the products that will have their rates altered, the new edition clarifies the correct application of the IPI on the turnover of industrialized products, ensuring legal security and the advancement of tax relief measures. The text also presents specific treatments to preserve practically all the effective production of the MFTz, considering the Basic Productive Processes.

The measure also brings additional IPI reduction, from 18% to 24.75%, for cars. “The increase in this percentage equates the tax reduction for the automotive sector to that granted to other industrialized products,” says the Ministry of Economy.

The ministry also explained that the decree would benefit domestic and imported products and positively impact the Gross Domestic Product (GDP) by reducing the cost of Brazil and increasing legal certainty.

“It is expected to increase the industry’s competitiveness, with lower taxes and increased production.”

The IPI is a federal tax levied on about 4,000 domestic and imported items that have undergone some industrialization process (processing, transformation, assembly, packaging, or restoration).

With an extra fiscal character (regulatory tax), the IPI can be used to foster an economic sector by exempting or reducing its rates so that more products produced by the industry are sold.

With information from Agência Brasil