Provisional Measure (“Medida Provisória”) for the "Rota 2030 - Mobility and Logistics Program" - New tax provisions for the automotive sector
The Provisional Measure Nr. 843 (‘MP’), published last Friday, July 6, establishes mandatory requirements for sales of vehicles in Brazil, as well as creates the ‘Rota 2030 Program’ and provides the tax regimen of auto parts to be produced, whose highlight is a concession of tax credits to industry up to R$ 1.5 billion per year over the next 15 years. In contrast, the automakers must invest, at least, R$ 5 billion in research and development per year in the country.
The Program purpose is to increase investments in research and innovation in the country, as well as stimulate new generation of technologies and automate industries’ productivity for mobility and logistics. The idea is to strengthen national subsidiaries tooling complex aiming to make competitive the production of cars, trucks, buses, and chassis with engine and Brazilian auto parts in the market.
As an incentive to the program, as provided in article 11 of the MP, the company may deduct from Corporate Income Tax (‘IRPJ’) and Social Contribution on Net Income (‘CSLL’), the amount corresponding to the application of the IRPJ and its additional rate and CSLL rate up to 30% of the expenses incurred in the country, during the calculation period, as long as they are classified as operational expenses for IRPJ purposes and applied in research and development.
"Rota 2030 Program" includes obligations for manufacturers. Among the measures to be incorporated is the vehicles labeling, which should inform vehicle levels of efficiency and safety. It will also be necessary to invest in reducing fuel consumption. Systems such as automatic emergency braking, track and lateral traffic assist, collision warning, among other safety features are some of the technologies that could be applied in cars until 2027, since driver assistance is the third requirement of the program.
Now, the MP should be converted into law by the National Congress, which is expected to be done as soon as possible in order to ensure market predictability with investors and even automakers headquarters aiming to heat up the industry.
On the same date, President Michel Temer also signed a decree reducing the Industrialized Products Tax (IPI) on vehicles equipped with hybrid and electric motors.
According to Decree Nr. 9.442/2018, the rates will change from 25% for a range within 7% and 20%, depending on the energy efficiency.