Following the decline in economic activity caused by the health crisis, the government has been issuing decrees to encourage investment and boost activities that are labour-intensive and generate positive spillovers for other sectors of the economy.
Along these lines, Decree 129/020 was issued in April, easing the conditions for social housing projects; in May, Decree 138/020 also eased and broadened the regime for large-scale projects (see article); and most recently, on 26 May, Decree 151/020 was issued, granting temporary tax benefits to investment projects filed under Law No. 16,906.
The temporary benefits relate to corporate income tax (IRAE) and consist of the following:
- Investments made between 1 April 2020 and 31 March 2021 will be counted at 150% of their value when calculating the amount exempt from IRAE. This additional amount will not be deducted from the total exempt amount. This applies to both projects already filed and new projects.
- For projects filed between 1 April 2020 and 31 March 2021, the IRAE exemption percentage determined by the indicator matrix will be increased by 20%, provided that at least 75% of the total committed investment has been made by 31 December 2021.
These two benefits may be combined for the period between 1 April 2020 and 31 March 2021.
Companies are also given greater flexibility to use the IRAE exemption. For financial years ending between 1 April 2020 and 31 March 2021, the company may choose one of the following two options:
- Suspend for one year the exemption period granted in the promotional declaration (useful for a year without profits), or
- Raise the IRAE exemption cap to 90% of the tax payable (for that year only).
The company must state which option it has chosen when filing its control and monitoring information.
If you need further information, please do not hesitate to contact our team or email info@inglobal.com
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