Depreciation expenses must be according to the rates approved by the tax authorities. All rates of depreciation are applied on the straight-line basis. Rates for machinery and installations, air conditioning, lifts and equipment are based on them working an 8 hour shift per day. For double shifts, the rates can be increased by 50% and for triple shifts by 100%.
Rates can be increased or decreased if the taxpayer can prove that the asset concerned has a longer or shorter life. Leasing improvements are normally depreciated over the period of the lease.
|Type of Assets||Rate per Annum %|
|Buildings- Industrial, office and Warehouses||4|
|Machinery and installations||10|
|Tools and Moulds||20|
|Office furniture and fittings||10|
|Automobiles and lorries||20/25|
|Aircraft, including engines||10|
There has been an increase in incentives by the government for foreign investments and exporting in the past 15 years, especially for the North and Northeast regions.
The incentives vary between Federal, State or Municipal taxes and are specific to the company’s activity.
• Incentives for developing certain regions in Brazil:
– 75% reduction of income tax
(for approved projects);
– 12.5% reduction where modernising or expanding an existing project.
Incentives for innovation
– Companies may deduct up to 80% of the innovation expenses from income tax.
The Manaus Free Trade Zone (MFTZ) is a free trade area that offers tax incentives to attract businesses to the Amazon region. E.g.:
– Suspension of importing taxes (II,
IPI, PIS-Import, COFINS-Import);
– Special rates for PIS and COFINS
– Credit Incentive on ICMS
– Exemption on IPTU and others.
Investments in sporting projects approved by the Ministry of Sports may deduct 1% of income tax.
Brazil will allow a foreign tax credit up to the limit established by the Brazilian Tax Authorities (tax rate of 27.5%) to tax treaty countries. For non-tax treaty countries, a foreign tax credit will only be allowed under reciprocal tax treatment.