Brazil: Congress passes new tax incentives for chemical sector

The new tax incentive schemes, PRESIQ and EIQ, are aimed at enhancing the competitiveness of Brazil’s chemical sector through tax incentives, regulatory adjustments, investment promotion, modernisation, and technological innovation.

Brazil’s Federal Senate has approved Bill 892/2025 on 18 November 2025, establishing the Special Sustainability Programme for the Chemical Industry (PRESIQ) and amending the existing Special Regime for the Chemical Industry (REIQ).

The bill aims to enhance the competitiveness of Brazil’s chemical sector through tax incentives, regulatory adjustments, investment promotion, modernisation, and technological innovation.

As per the bill, companies can qualify for financial credits in two ways: through the Industrial modality, which incentivises the acquisition of key chemical raw materials, or the Investment modality, which supports capital expenditures for plant expansion or modernisation. These credits, which are capped annually and require beneficiaries to allocate a portion toward research and development (R&D), are ultimately utilised against federal taxes such as IRPJ and CSLL.

Additionally, the proposal temporarily adjusts the tax rates within the existing Special Regime of the Chemical Industry (REIQ) through 2026, smoothing the transition to the new, long-term incentive structure.

Bill 892/2025 now awaits presidential approval and the issuance of further regulations for implementation.

PRESIQ

The financial credits authorised under PRESIQ correspond to credits for the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profits (CSLL).

The scheme has two modalities:

1. PRESIQ – Industrial Modality

This industrial tax credit is specifically for petrochemical complexes, which applies to both domestic purchases and imported inputs. Eligible products include petrochemical naphtha, ethane, ethylene, natural gas, ammonia, and other specified materials used in production. A 6% tax credit will apply to domestic and imported purchases by petrochemical complexes for specific inputs, with at least 8% of the credit required to be invested in research and development.

2. PRESIQ – Investment Modality

Under this investment modality, petrochemical and chemical companies must expand or modernise production in accordance with the program’s guidelines, without overlapping with other tax incentives. The financial credit rate for the Investment Modality is up to 3% of gross revenue, capped by the investment amount, with at least 10% of the credit dedicated to research and development.

The PRESIQ incentive regime is instituted for the period from 1 January 2027 to 31 December 2031.

REIQ

Bill 892/2025 also amends the REIQ, specifically updating PIS and COFINS rates. Under the current provisions, the combined rate on sales of petrochemical naphtha to petrochemical complexes is set at 8.52% through 2027.

The rates are as follows:

These reduced rates also apply to the sale of certain chemical products for use as inputs in the production of other chemical goods.

Regional Incentives

For incentives related to the reactivation, modernisation, or expansion of industrial plants in the North, Northeast, or Centre-West Regions (excluding the Manaus Free Trade Zone), the minimum global investment requirement may be waived. However, the project must fulfil specific requirements, including realising investments in research, development, and technological innovation in the region, in a minimum amount equivalent to 10% of the calculated presumed credit.