Rebeca Duran

Rebeca Duran

Staff Writer
The Brazil Business


Tax Incentives for Networks and Data Centers

Rebeca Duran

Rebeca Duran

Staff Writer
The Brazil Business


These tax incentives were created in September, 2012 and approved in 2013. Here you will find why they were created, what incentives are these, who will be benefited from them and how to get these incentives.

In February 2013, the federal government regulated the application of Regime Especial de Tributação do Programa Nacional de Banda Larga, known as REPNBL, which is the Special Taxation Regime of the Broadband National Program. This is an important measure to stimulate the deployment and expansion of the Brazilian service of broadband internet.

The Brazilian government tax relief provided until 2016 will be of BRL 3.8 billion. The government hopes that the incentive generates an investment increase between USD 16 and 18 billion compared to what would be normally achieved in the period.

What Are the Tax Incentives?

The intention of the special regime is to develop projects to expand or modernize telecommunication networks that support Internet access with broadband, also including satellite ground stations that contribute to the REPNBL objectives of implementation.

The measure provides the suspension of the PIS/Pasep, Cofins and IPI tax contribution to networks that support broadband. It also provides tax relief over the following costs:

  • construction materials
  • services associated to civil works
  • cooling, radio towers, batteries, etc
  • imported products acquired in the national territory
  • acquisition of equipment and network components produced according to its Basic Production Process
  • acquisition of equipment and network components developed with domestic technology.

The suspensions mentioned above only turn into zero rate after the project implementation completion and since the good or the building material has been used or incorporated into works related to the project.

Why the Incentives Were Created?

The REPNBL special taxation has as main objectives the reduction of regional differences, the modernization of telecommunications networks, the provision of high quality standards to users, and the mass access to network and telecommunication services that support access to broadband internet.

The expected benefits with the implementation of REPNBL are:

  • deployment, modernization and expansion of networks that support broadband
  • advanced investment in the sector until 2016
  • deducting the costs of telecommunications projects
  • increasing the capacity of telecommunications networks in the country
  • more affordable broadband plans and with better quality services
  • promoting digital inclusion.

"We are encouraging the network infrastructure because we think this is the way to improve the availability of phone and internet services in Brazil," said Paulo Bernardo, the Minister of Communications. He recalled that "telecommunication networks are infrastructure and should be considered as important to the country as the ports, airports, highways and railways."

Who Can Benefit from These Incentives?

The companies that will benefit from this measure are the ones working with telecommunications, such as companies that work with transport networks, access networks, satellite systems and data centers. Also business consortium that presents at least one consortium linked with telecommunication services.

Companies involved with the Special Unified scheme of Taxes Collection and contributions owed by Micro and Small Companies, named as Simples Nacional, are not included in the REPNBL system. However, such companies can be organized in a consortium in order to create a new legal entity that will be allowed to receive the REPNBL tax relief.

Regional Limitations to the Incentives

The Ministry of Communication established rules to the deployment of 3G networks in cities that still don't have this technology and to the infrastructure construction of optical fibers in the North, Northeast and Mid-West regions. The projects for South and Southeast regions should be also applied in North, Northeast and Center-West in order to put an end in Brazilian regional differences regarding the access of broadband internet .

The projects including 3G technology will have to prioritize the implementation in cities that do not have this service. In the case of 4G technology, the required percentage will be the same as those adopted by the National Telecommunications Agency in 2012: 50% of network equipment and components will be manufactured in Brazil and 20% using domestic technology.

The 4G technology will enable coverage in high-speed, in areas where it is more difficult to develop the optical fiber infrastructure, such as areas with precarious urbanization.

How Companies Can Have Access to These Incentives

To have access to the special regime taxation, companies will have to registry their own network deployment projects on the website of the Ministry of Communications until June 30, 2013.

Companies interested in having the benefits of REPNBL will have their projects evaluated by the Ministry of Communications according to the following guidelines:

  • reduction of regional differences
  • modernization of telecommunication networks and high quality standards to be provided to users
  • the mass of network access and telecommunication services that support access to broadband Internet.