Tax Reduction for the Construction Industry in Brazil
The tax reduction for the construction industry started in 2006 and continued until 2012. In that year the reduction should have come to an end, but it did't happen. In this article you will find out more about the tax reductions for the construction industry.
The tax reduction for the construction industry was the reduction to zero of the IPI tax for consumer goods and building materials. The beneficiaries of this reduction are:
- construction industry
- automotive
- white goods
In 2006, three lists of products admitted in the reduction were published. In the same year the three tables were substituted by the Decree 6.006/2006 that consolidated the Table of Incidence of Tax over industrialized products, known as TIPI.
Another list of materials were included in 2007: the steel section, expanding even more benefits to the construction industry. In 2009, another 30 products were included in the table by the Decree No. 6809. And 2012 construction materials, machinery, household appliances and automotive vehicles were also part of TIPI. However, all of these benefits were programmed to end in 2012.
Extension of the Reductions
In 2012, the Brazilian federal government extended by 12 months the period of validity of the reduction of IPI to materials and included new products to the list of beneficiaries. Furthermore, there was relief for the payroll of materials companies and the a increase of the tariff on imported goods.
According to the Ministry of Finance, these measures will represent a cut of 1.8 billion USD in taxes on the materials industrial chain by the end of 2013. The sector has benefited from a lot with the government's actions.
Renovation of the Benefits in 2012
| Sector | Product | Normal Rate | Reduced Rate | Start Date | Validity |
| Construction Materials | Cement, paints, vynil, varnishes, mortars, seats and covers for toilets, bathrooms, boxes for showers, sinks, washbasins, hinges, locks, valves for flow, electric shower, galvanized steel roofing, tiles and slabs, others. | 4 to 15% | 0 to 10% | 30/03/2009 | 31/12/2013 |
| Construction Materials (floors and stones) | Ceramic floor tile porcelain tile stone, marble and granite | 5% 5% 0% | 0% 0% 0% | 30/03/2009 | 31/12/2013 |
New Material Included
| Sector | Product | Normal Rate | Reduced Rate | Start Date | Validity | Fiscal Waiver |
| Construction Materials (new products) | Solid wood flooring laminate flooring vinyl flooring drywall | 5% 5% 5% 5% | 0% 0% 0% 0% | 01/09/2012 | 31/12/2013 | 2013: 375 million BRL |
2013 Expectations
It is estimated that the sale of building materials will grow 4.5% in 2013, showing strong acceleration versus the 1.4% registered in 2012. According to estimates, the growth will be boosted by industry sales to retailers, which are expected to grow 7%.
Retail sales account for 50% of industry revenues. Sales to the real estate sector, such as construction of commercial and residential buildings, are responsible for 30% of industry. Retail sales should advance 2.0% to 2.5% in 2013, while sales to the infrastructure segment – 20% of sales – should advance 2.0%.
Even after having benefited from a series of incentives in the last months of 2012, the construction industry will insist on the continuation of exemptions in 2013. The main target of the ICMS tax, which the rate has a weight of 18% for most of the construction materials in São Paulo.