Machinery imported temporarily for the production of goods are eligible for some tax benefits. This article explains which cases this exemptions apply to.
Certain goods are allowed to enter Brazil without the payment of some duties since they might not be used for commercial purposes or they won't stay in the country for a long period.
This is commonly applied to goods imported due to expositions, fairs, sports and cultural events. Capital goods, which are used in the manufacturing or processing of other products, might also apply to this rule.
The Brazilian Federal Revenue includes the temporary import of machinery and equipment in two different categories:
- Temporary admission of goods for economical usage, under leasing or rental, with partial exemption of taxes.
- Temporary admission for maintenance, assembling, renovation or other processing actions, with complete exemption of taxes.
The tax exemption applies for some or all of the following duties:
- Import Tax (II)
- Tax on Industrialized Products (IPI)
- PIS/PASEP Tax
- Contribution for Social Security Financing (Cofins)
Temporary Admission for Economical Usage
Machinery and equipment imported for manufacturing other products or the provision of services enter this category.
The duties charged are proportional to the time that the capital goods stay in the country. The amount of tributes to be collected will be equivalent to 1% of the import taxes for each month of stay in the country, with a maximum limit of 100%. So, if the machinery stays in the country for 24 months, 24% of the taxes must be paid.
Goods imported under this regime might be eligible for a complete tax exemption if they're going to be used cooperatively in projects between Brazil and international partners, or if they're related to specific areas, such as liquefied natural gas, for example.
Temporary Admission for Processing Actions
Machinery and equipment temporarily imported for processing purposes are eligible for complete exemption of taxes in Brazil. According to Brazilian law, the operations that are considered for these cases are:
- Industrialization processes relating to the processing, assembly, restoration, refurbishment, conditioning, or reconditioning of the good itself.
- Maintenance and repair of foreign goods that will return to the country of origin after they have been modified.
After this admission is approved, the customs authority will decide how long the temporarily imported goods may stay in Brazil.
If the machinery or equipment are under a contract of a lease, loan or rental, the period of stay equals the period described in the contract. If there is no formal contract, the stipulated period is of three months, with the possibility to double this once.
Both regimes above must follow some basic conditions to be applied.
It is essential that the beneficiary signs a Responsibility Term, which assumes the commitment to pay the suspended tributes if any conditions of the regimes above are not followed. This term must be presented along with the Import Declaration (DI) or equivalent document.
In some cases, according to the finality and market value of the temporarily imported goods, a guarantee of the suspended taxes must be presented in addition to the Responsibility Term. This guarantee is not necessary if the amount of exempted taxes is lower than BRL 100,000.
An additional fine of 10% over the customs value of the merchandise is applied if any of the conditions, deadlines, or requirements are broken.