COVID-19: Brazil approves Tax and financial support measures
Alert Tax Brasil
Due to the crisis caused by COVID-19, the Federal Government has published a series of measures with the aim of relieving the financial difficulties faced by companies regarding the slowdown in the economy caused by social isolation. Among these measures is the exemption of tax obligations, with the exemption or reduction of tax rates. Among these exemptions, it is worth highlighting the IOF-Credit and Contributions due to third parties (also known as contributions to the S System).
The IOF-Credit is levied on credit operations, such as loans, discounts, advance to depositor, financing, among others. In relation to this tax, the Decree No. 10,305 of April 1, 2020 (accessible here) amended Decree No. 6,306/2007 to include that in the period between 04.03.2020 and 07.03.2020 the rates on credit operations are reduced to zero.
This reduction to zero also includes the unsettled amount of the credit transaction that has been subject to extension, renewal, relocation, composition, consolidation, debt confession and similar operations, and reaches as well the IOF-Credit additional rate of 0.38%.
The Contributions to third parties are levied on Companies’ revenues and are destined to certain private entities that develop social works.
As regards to these contributions, Provisional Measure No. 932 of March 31, 2020 (accessible here) reduces, until 06.30.2020, the rates by 50%, as follows:
NEW RATE (VALID UNTIL JUNE 30)
(Agribusiness and legal entity)
1,8% on the payroll and 0,25% on the marketing revenue from rural production
1,25% on the payroll and 0,125% on the marketing revenue from rural production
(Rural Producer and individuals)
1,8% on the payroll and 0,2% on the marketing revenue from rural production
1,25% on the payroll 0,1% on the marketing revenue from rural production