On 5th July 2018 government sanctioned guidance (Provisional Measure 843/18 (PM 843)) that initiates a new tax incentive program for the automotive sector. According to the program the following main tax incentives for a five-year period, which may be renewed twice:
- Reduce the IPI (excise duty) by 1% or 2% for vehicles meeting certain energy efficiency and other performance indicators from 2022 onwards;
- An additional corporate tax deduction for R&D expenditure (34% from 30% to 45% of R&D spending in Brazil) from 1 January 2019.
The corporation tax deduction introduced by PM 843 can be used in conjunction with other existing tax incentives in Brazil in the North and North East regions and R&D-related incentives under Law 11.196 / 2005).
