BRAZIL Law and Practice Contributed by: Carlos Vilhena, Roberta Bilotti Demange and Marina Bertucci Ferreira, Pinheiro Neto Advogados
Mining and exploration Specifically concerning the mining sector, the Tax Reform could potentially result in an increase of the tax burden on companies, as the approved proposal allows a maximum 1% excise tax to levy on activities that are deemed harmful to the health of the environment, which may include exploration and mining activities. However, the effectiveness of such excise tax is not immedi - ate and will depend on further regulation by the federal government. The bill currently under con - sideration in Congress on the matter proposes the imposition of the excise tax on iron ore only. Other minerals would not be impacted. The ini - tially proposed rate was 1%, but recent reports have reduced it to 0.25%. The final applicable rate will be determined upon the bill’s enactment into law. 4.2 Tax Incentives for Mining Investors and Projects There are no tax stabilisation agreements in Bra - zil. Tax exemptions, breaks and incentives are granted or cancelled via agreements ( convêni- os ) entered into between the relevant Brazilian governmental authorities. More commonly, they are granted at the state level and with reference to the ICMS taxes. However, states that usually grant ICMS tax breaks and incentives to attract investment, but without the consent of other states, may generate a so-called tax war. In addition, there are tax breaks available in con - nection with IRPJ assessed in projects located in the Amazon or the north-eastern regions of the country. These tax breaks may represent a deduction of 75% in IRPJ tax.
on virtually all expenses; and (iii) a limited num - ber of tax rate bands. Regarding item (iii), while each federative entity will be empowered to set its specific tax rate through legislation, this rate will be uniform for all transactions involving tangible or intangible goods, including rights, or services. However, certain goods and services may be eligible for lower or zero tax rates under IBS and CBS. Moreover, the Senate will hold the authority to establish reference rates for IBS and CBS at the federal, state, and municipal levels. Transition period The transition period will last eight years. Dur - ing this period, CBS and IBS will be gradually implemented, while current consumption taxes and correspondent tax incentives will be gradu - ally reduced, until the new system is fully imple - mented in 2033. Starting in 2026, the CBS and IBS will be imple - mented with a trial rate of 0.9% for CBS and 0.1% for IBS. In 2027, the PIS/Cofins will be extinguished, and the CBS rate will be raised to a reference rate (to be determined later by the Ministry of Finance). Simultaneously, the IPI rate will be reduced to zero in 2027, with an excep - tion for items manufactured in the Manaus Free Trade Zone. From 2029 to 2032, a gradual phase-out of ICMS and ISS is anticipated, with rates decreasing to 90% in 2029, 80% in 2030, 70% in 2031, and 60% in 2032. In 2033, the new system will be ful - ly implemented, leading to the complete extinc - tion of old taxes and legislation. Moreover, from 2029 to 2078, there will be a gradual 50-year shift from origin-based (production location) to destination-based (consumption location) tax collection.
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