Tax Reduction for Infrastructure Development in Brazil
Brazilian government has a program named REIDI, which allows tax reduction for infrastructure development in the country. In this article we outline what is the benefit, how it works and how to apply for it.
What is REIDI?
REIDI is short for Regime Especial de Incentivos para o Desenvolvimento da Infraestrutura, or Special Incentives Regime for Infrastructure Development. It is one of the measures of PAC, the Programa de Aceleração do Crescimento or growth acceleration program. It suspends, for 5 years, the collection of PIS/Cofins in the supply of goods and inputs for infrastructure projects, enabled by the respective ministry of the economic sector of the project and by Receita Federal, the Federal Revenue.
How REIDI Works
REIDI stimulates investments for infrastructure construction projects through tax breaks. It suspends the contribution of PIS/PASEP and Cofins for the revenue provided by the:
- sale of new machinery, instruments and equipment, when acquired by a benefited legal entity for the incorporation into infrastructure projects as fixed assets
- sale of construction materials, when purchased by a benefited legal entity, to use in the incorporation of infrastructure projects as fixed assets
- service provision, by a legal entity established in the country, to a benefited legal entity, when applied to infrastructure projects as fixed assets.
It also suspends the PIS/PASEP and Cofins contribution on imports of:
- new machinery, instruments and equipment, when imported directly by a benefited legal entity for the incorporation in infrastructure projects as fixed assets
- construction materials, when imported directly by a benefited legal entity for the incorporation or use in infrastructure projects as fixed assets
- the payment of services imported directly by a benefited legal entity, when applied in infrastructure projects as fixed assets.
After the use of incorporation of the goods or services acquired or imported in the infrastructure project, the quota of these contributions becomes zero.
Who Can Apply for REIDI
Only legal entities qualified by the Secretaria da Receita Federal, the Secretariat of the Federal Revenue, can apply for REIDI benefits. Therefore, the legal entities of the following sectors, which are administrators of infrastructure projects implementation, can apply:
- transportation, encompassing highways, waterways, organized ports, private use port facilities, urban trains and railways, including locomotives and railroad cars
- energy, encompassing exclusively:
- generation, cogeneration, transmission and distribution of electric energy
- production and processing of natural gas in any physical state
- basic sanitation, pertaining exclusively to the potable water supply and the sewage treatment system
- irrigation
- pipeline.
Legal entities which opt for the Simples Nacional or have unresolved tax issues and or obligations with the Secretariat of the Federal Revenue cannot apply for REIDI benefits.
How to Apply for REIDI
The legal entity interested in the benefits that REIDI provides must send their own forms to the Secretariat of the Federal Revenue, together with:
- the registry of the businessperson in the public registration of commercial companies; or, in case of entrepreneurial company, the contract of the current social contract, duly registered; or, in case of entrepreneurial company by actions, documents that may serve as proof of the mandate of its administrators
- of the indication of the company holder or the list of partners, private people, as well as directors, managers, administrators and attorneys, with their respective CPF and address indicated
- the list of partners which are legal entities and their respective CNPJ, as well as the list of its partners, private people, directors, managers, administrators and attorneys, each one with their CPF and address indicated
- copy of the respective Ministry's document, which contains general instructions and recommendations, responsible for the sector from which the company belongs
- documents that prove the tax returns of the applying legal entity regarding taxes and contributions administrated by the Secretariat of the Federal Revenue.
The project will then be analyzed by the Ministry responsible for the favorable sector. The approved projects will be published in the Diário Oficial da União, the official journal of the union.
The qualification for REIDI can be cancelled if the legal entity desires, when it finishes its participation in the project, within 10 days from the day when the project was completed, or in case the beneficiary not having met the requirements for the qualifications of the regime.