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Brazilian Car Industry Tax Breaks To Last The Year

by Mike Godfrey, Tax-News.com, Washington

31 October 2012


Industrial profits tax (IPI) breaks for the Brazilian car manufacturing industry have been extended for a further two months, until to the end of the year, to ease the transition to a new supportive tax regime lined up for 2013.

The IPI tax breaks, introduced in May, had propped up car sales to record levels in August just before their planned expiry. On fears that industry sales would promptly nosedive, the breaks were extended into September and October but had an only limited impact, with sales in September declining 30% against August's highs.

Now, Brazilian President, Dilma Rousseff has confirmed that the government will not proceed with the removal of the tax breaks at the end of October to ensure market prices remain broadly level. The nation's Finance Minister, Guido Mantega, speaking later that day, confirmed that although Brazil expects this to be the final extension, he did not rule out the possibility of further extensions.

From 2013, new tax breaks will be offered to innovative car manufacturers. Under the plans, manufacturers and importers will be eligible for tax breaks if they commit to meet energy efficiency improvements of 12% by 2016, and incorporate the latest safety technology, such as anti-lock braking systems, into their builds. Manufacturers importing foreign-made components must carry out a significant proportion of a model's assembly in Brazil to be eligible.

TAGS: tax | business | sales tax | fiscal policy | law | manufacturing | tax rates | Brazil | tax breaks

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