Renata Garcia

Renata Garcia

Staff Writer
The Brazil Business


IRPJ Exemption for Digital Inclusion Program

Renata Garcia

Renata Garcia

Staff Writer
The Brazil Business


In Brazil, companies that contribute to the Digital Inclusion Program receive tax incentives from the government. These companies are exempt from paying income tax, which in Brazil is IRPJ. In this article you will learn more about this tax relief.

Digital Inclusion Program

The Digital Inclusion Program was created by the MCTI, short for Ministério da Ciência Tecnologia e Inovação, which is Portuguese for the Ministry of Science Technology and Innovation. This program aims to provide poor communities with access to information technology, enabling young people to enter the labor market and workers who are required to use computers in their jobs. This program prioritizes municipalities and rural areas with the lowest Human Development Index.

The program focuses on the implementation of Telecenters or Digital Inclusion Centers in which the benefited people will learn how to use a computer and how to surf the internet, contributing to the improvement of education and labor quality.

IRPJ Exemption

Exemption from income tax is intended for company holders that are involved in implementation, modernization, expansion or diversification projects as part of the Digital Inclusion Program, until the end of 2018. The companies involved benefit from the tax exemption for a period of ten years.

Conditions to grant the tax benefit

The first condition is that the production unit of the company must be located within the area that SUDENE, short for Northeast Development Superintendence, and SUDAM, short for Amazon Development Superintendence, operates. This covers the entire Northeast and Northern regions of Brazil, and partial areas in the States of Minas Gerais and Espírito Santo in the Southeast and the State of Mato Grosso, in the Brazilian Central West.

The second is that the project's activities must be limited to the manufacture of machinery, equipment, instruments and devices for digital technology and focused on the digital inclusion program. The last condition is that the company must choose to opt for this taxation based on actual profit, known as Lucro Real.

Concepts applied to Projects

There are five modalities for the submission of projects. They are implementation, diversification, partial modernization, total modernization and expansion.

Implementation Project
Introduces a new production unit to the market.

Diversification Project
Introduces new production lines, with or without discontinuing existing lines, to produce a new product or service.

Total Modernization Project
Introduces new technologies, new methods and means of production, completely modernizing the production process of the manufacturer.

Partial Modernization Project
Introduces new technologies, new methods and means of production, partially modernizing the production process with one or more lines of production.

Expansion Project
Extends the real installed capacity of one or more unit production lines.

Criteria for Acceptance of Projects

The implementation, diversification and total modernization projects will only be admitted when the modernized production line achieve effectives production, which means exceeding 20% of the new real installed capacity.

There are two conditions for acceptance of the partial modernization and expansion projects. The first is that the production must expand at least 20% of the real installed capacity for infrastructure projects, and at least 50% for the other projects. The second condition is that the effective production must exhaust the previous installed capacity and reach a production higher than 20% of the new capacity.

Steps for Obtaining Tax Relief

All types of projects follow these three steps

  • The company interested will submit an application to SUDENE, by attaching documentation established according to the roadmap of elaboration of lawsuits, which can be found on the SUDENE website. If the production unit is going to be located in the Brazilian Legal Amazon Region, the application must be sent to SUDAM.
  • The documents will be examined and if it complies with the conditions according to legislation and regulations, a Constitutive Report will be issued which will grant the tax benefit.
  • Then, the company interested must submit an application to the Federal Revenue Secretariat unit appointed in the Constitutive Report and with specific form from the Federal Revenue, requesting recognition of the benefit.

The benefit will be valid for 10 years from the year that the Constitutive Report was issued.