Post by Weiss on Feb 26, 2009 5:12:32 GMT 4
Brazil: Provisional measure 449/2008 released
As discussed in a previous edition, law 11,638/2007, enacted on December 28 2007, introduced new rules to adapt Brazilian accounting practices to international accounting standards. Since then, the business community was eagerly waiting for the introduction of new provisions by the Brazilian Revenue Service, setting forth the tax implications (if any) deriving from the new Brazilian accounting standards.
In this sense, provisional measure 449, enacted on December 4 2008, guaranteed the fiscal neutrality, that is, no adverse tax consequences should be triggered from the adoption of the new accounting criteria in connection with the recognition of revenues, costs and expenses computed on the assessment of net profits. To achieve this result, Brazilian taxpayers will have the option to elect for a transitional tax regime (regime tributário de transição – RTT), under which, for tax purposes only, taxpayers will be allowed to calculate corporate income tax and follow the applicable accounting criteria before the enactment of law 11,638.
The transitional tax regime is optional for the 2008 and 2009 calendar-years (mandatory as from 2010) and shall be in force until a new law is enacted setting forth the tax effects (if any) stemming from the new methods and accounting criteria. Any differences between the amount of tax due based on the option for the RTT and the amount previously calculated shall be paid by the last working day of January 2009, or compensated, according to the measure. In addition, the option of the RTT for the corporate income tax (IRPJ) shall imply the adoption of the tax regime also for social contributions purposes (CSLL, PIS and COFINS).
Tax measures enforced for stimulating the growth of the Brazilian economy
Provisional measure 451, enacted on December 16 2008, altered, as from January 1 2009, the thresholds of monthly salaries for the calculation of individuals' income tax for the calendar-years 2009 and 2010. The measure also introduced two new intermediary income tax brackets (7.5% and 22.5%), with the intention of reducing the tax burden of middle- class individual taxpayers. The latter measure should enable the injection of approximately BRL 4.9 billion (approximately $2.2 billion) into the Brazilian economy and help reducing the effect of the current financial crisis.
In addition, the Brazilian government also announced the reduction of the tax on financial transactions (IOF) on credit transactions (for individual taxpayers) by issuing decree 6,691/2008. In this sense, the daily IOF rate was reduced from 0.0082% to 0.0041%, as to lower the cost of financing.
Finally, decree 6,687/2008 introduced further rate reductions of the excise tax levied on sales of vehicles, as from December 12 2008, up to March 31 2009. This measure has already lowered the prices of cars, thus reducing the decrease of sales already noticed in the market and protecting the Brazilian automotive industry from adverse effects of the financial crisis.
Nélio Weiss (nelio.weiss@br.pwc.com) & Philippe Jeffrey (philippe.jeffrey@br.pwc.com), São Paulo
As discussed in a previous edition, law 11,638/2007, enacted on December 28 2007, introduced new rules to adapt Brazilian accounting practices to international accounting standards. Since then, the business community was eagerly waiting for the introduction of new provisions by the Brazilian Revenue Service, setting forth the tax implications (if any) deriving from the new Brazilian accounting standards.
In this sense, provisional measure 449, enacted on December 4 2008, guaranteed the fiscal neutrality, that is, no adverse tax consequences should be triggered from the adoption of the new accounting criteria in connection with the recognition of revenues, costs and expenses computed on the assessment of net profits. To achieve this result, Brazilian taxpayers will have the option to elect for a transitional tax regime (regime tributário de transição – RTT), under which, for tax purposes only, taxpayers will be allowed to calculate corporate income tax and follow the applicable accounting criteria before the enactment of law 11,638.
The transitional tax regime is optional for the 2008 and 2009 calendar-years (mandatory as from 2010) and shall be in force until a new law is enacted setting forth the tax effects (if any) stemming from the new methods and accounting criteria. Any differences between the amount of tax due based on the option for the RTT and the amount previously calculated shall be paid by the last working day of January 2009, or compensated, according to the measure. In addition, the option of the RTT for the corporate income tax (IRPJ) shall imply the adoption of the tax regime also for social contributions purposes (CSLL, PIS and COFINS).
Tax measures enforced for stimulating the growth of the Brazilian economy
Provisional measure 451, enacted on December 16 2008, altered, as from January 1 2009, the thresholds of monthly salaries for the calculation of individuals' income tax for the calendar-years 2009 and 2010. The measure also introduced two new intermediary income tax brackets (7.5% and 22.5%), with the intention of reducing the tax burden of middle- class individual taxpayers. The latter measure should enable the injection of approximately BRL 4.9 billion (approximately $2.2 billion) into the Brazilian economy and help reducing the effect of the current financial crisis.
In addition, the Brazilian government also announced the reduction of the tax on financial transactions (IOF) on credit transactions (for individual taxpayers) by issuing decree 6,691/2008. In this sense, the daily IOF rate was reduced from 0.0082% to 0.0041%, as to lower the cost of financing.
Finally, decree 6,687/2008 introduced further rate reductions of the excise tax levied on sales of vehicles, as from December 12 2008, up to March 31 2009. This measure has already lowered the prices of cars, thus reducing the decrease of sales already noticed in the market and protecting the Brazilian automotive industry from adverse effects of the financial crisis.
Nélio Weiss (nelio.weiss@br.pwc.com) & Philippe Jeffrey (philippe.jeffrey@br.pwc.com), São Paulo