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Updated January 1st, 2024 at 12:31 IST

Brazil unveils tax incentives to encourage corporate investment

President Lula's administration is committed to fostering industrialisation by supporting "green" projects, including flex-fuel and EVs, renewable

Business Desk
Brazil
Brazil | Image:Unsplash
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Brazil's Vice President, Geraldo Alckmin, revealed government initiatives designed to offer tax benefits to companies, facilitating the acquisition of new machinery and promoting investments in transportation. 

These measures align with President Luiz Inacio Lula da Silva's strategy to "re-industrialise" the largest economy in Latin America, which is still striving to recover industrial output levels from the pre-pandemic era, currently standing more than 18 per cent below its 2011 peak.

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President Lula's administration is committed to fostering industrialisation by supporting "green" projects, including flex-fuel and electric vehicles, renewable power, and biofuels. 

Alckmin announced the first measure, an executive order establishing the "Mover" programme, aimed at reducing income taxes imposed on transportation companies to encourage investments in new technologies, research, and development. 

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The programme is projected to provide benefits totalling 3.5 billion reais ($721.34 million) next year, gradually increasing to 4.1 billion in 2028. 

Alckmin, who also serves as Lula's Minister of Development and Industry, stressed that the programme's immediate implementation aims to attract investments to Brazil, addressing issues of low investment and productivity.

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While an executive order ensures immediate implementation, congressional approval is required within four months. Lula's second measure involves a bill presented to Congress proposing 3.4 billion reais in income tax benefits for companies renewing their machinery, referred to as the "accelerated depreciation project." 

Alckmin highlighted the initiative's goal to stimulate the renewal of Brazil's industry by expediting equipment depreciation, ideally within two years instead of the typical 20.

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Anticipating a "second phase" for the programme in the future, Alckmin did not provide detailed information. To offset revenue losses associated with the tax benefits, Alckmin mentioned the imposition of import taxes, including those on electric vehicles imported from abroad.

(With Reuters Inputs)

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Published January 1st, 2024 at 12:31 IST

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