Temer signs decree regulating incentives for Automotive Industry in Brazil

November 9, 2018

Temer signs decree regulating incentives for Automotive Industry in Brazil

This Thursday, when he visited the Automotive Motor Show in Sao Paulo, President Temer signed the decree regulating the Provisional Measure of the Route 2030 program, Brazil’s new fiscal regime for the automotive industry in Brazil. The text of the Provisional Measure converted in law project, which still needs to be sanctioned by Temer, went through modifications in the House of Representatives Wednesday evening and was approved by the Senate Thursday morning.

According to the text approved by Congress, automakers will have to invest in research and development (R&D) of products and new technologies to be eligible for the fiscal incentives offered by Route 2030. Estimates indicate that companies from the sector will invest close to BRL 5 billion (USD 1.88 billion) in the next three years.

The changes made by the congressmen that are part of the special commission included the reduction of the industrialized products tax (IPI) (up to 3%) regarding flex motors-powered cars (driven by alcohol and oil) and IPI exemption on the importation of parts acquired by order of the automakers.

In 2018, the Temer administration issued the Executive Order 843, which established the Route 2030 Program – Logistics & Mobility. The presidential text, converted and approved as law project this week by Congress, aims to support the technological development, competitiveness, innovation, increase vehicle safety, environmental protection, energy efficiency, and the quality of cars, trucks, busses, chassis with engine, and auto parts (Art. 7).

Approval to take part in the Route 2030 program is conditioned by the approval of the Minister of Industry and Foreign Trade (MDIC).

To be eligible, automakers have to demonstrate that:

  • Produce vehicles categorized under codes 87.01 – 87.06 of the Table of Taxes on Industrialized Goods (Tipi) in Brazil, or auto parts or strategic systems to produce those vehicles;
  • Commercialize vehicles, auto parts or systems if these goods are not produced locally; or
  • Were granted approval on a development project and technological production of new products or new models of products that already exist, or new strategic solutions to mobility and logistics.

Route 2030 incentives include tax breaks of up to 30% of the amount spent on research (directed basic research, applied research, experimental development and structuring projects) and development (activities of development, supplier training, basic manufacturing, basic industrial technology and technical support services).

Automakers adhering to the program can benefit from those fiscal measures during a period of five years.

Brazil can consolidate itself as the main supplier of vehicles for Latin America, we have all the conditions for this”, said Marcos Jorge de Lima, Minister of Industry, Commerce, Foreign Affairs and Services.