The Government has announced the first Federal Tax Incentive for the construction of the High Speed Train (HST) between Rio de Janeiro and São Paulo, informs the O Globo newspaper (29 July). Published in the Official Federal Government Gazette (Diário Oficial da União) on 28 July, Provisional Measure 497 brings down to zero the rates of Social Integration Programme (PIS) and Contribution for Financing of Social Security (COFINS) on the provision of railway transport services, in the case of high-speed trains.
According to the Taxation Sub-Secretary of the Brazilian Inland Revenue, Sandro Serpa, what the intention is here is to show the companies which shall be running for the concession that this benefit shall already be in place as from 2015.
The tax renouncement with this measure has been estimated at R$ 22 million. The value has been calculated based on the estimated gross income of the concessionaire which shall be exploring this service, estimated at R$ 605.4 million (€ 267.90 million). In addition, says Mr. Serpa, the bullet train shall also be receiving some incentives from the States, which have already agreed to reduce the Sales Tax (ICMS) on the provision of such services. He feels that such measures could bring about a reduction in the costs of the companies and also in the fares for the users of the service. “Tax incentives are yet another attraction in order to reduce prices”, said Mr. Serpa.
Production of rails is unfeasible
The executive president of the Steel Brazil Institute, Marco Polo de Mello Lopes, has ruled out the possibility of the national production of rails to meet the demand created through the bullet train.
According to him, some steel companies looked into the possibility of setting up a production unit for this purpose, but in the end they concluded that it was not economically feasible. “They felt that it would not be economical to implement a laminator (the unit responsible for one of the stages of steel production) to supply the country with rails just for this demand”, said Mr. Lopes, remembering that the National Steel Company (CSN) used to produce rails in Brazil, but discontinued production due to lack of demand.
According to the executive, the bullet train project would use some 400 thousand tones of steel for the rails, and the minimum demand to make it feasible to invest in a dedicated unit for steel production would be 500 thousand tones annually.
Provisional Measure 497 has also implemented incentives that had already been announced as part of the package to benefit the export segment, but which had not yet got off the ground. One such measure would be the end of the reducer which currently applies to the Importation Tax for auto parts. At present, the car manufacturers can purchase these products from other countries, at a reduced rate of 40%.
This measure also expands the drawback regime, by which companies which bought supplies to manufacture products for export do not pay Importation Tax, PIS/COFINS and also Industrialized Products Tax (IPI). From now on, both the importation of raw materials and the purchase thereof on the national market (whether to produce to be sold abroad or to replenish stocks) shall not pay any federal taxes.
Incentives for World Cup Stadiums
The text also mentions the incentives that have been granted by the Federal Government for the construction or refurbishment of stadiums for the 2014 World Cup. There has been the creation of a Special Tax Regime for the Construction, Expansion, Refurbishment or Modernization of Football Stadiums (Recom).
The companies that implement such developments may purchase equipment, raw materials and services without any taxes being levied. This represents a total tax break of R$ 35.07 million (€ 15.52 million) in 2010. By the end of construction work, this volume of tax breaks will have reached R$ 350 million (€ 154.88 million).
highlights
04/05 | News
