Policies and actions to promote growth
Incentives for micro and small enterprises, tax reductions and credit supply to sustain growth
MORE BENEFITS FOR SMALL ENTREPRENEURS
Growing - National Microcredit Program
Since it was launched, in September 2011, until January 2012, 774,000 loans totaling R$ 941 million were granted under the program. The average amount of the loans was R$ 1.2 thousand. About 67% of all loans were granted to women and 80% of them were granted to small entrepreneurs in the Northeast region.
Individual Entrepreneurs (Empreendedores Individuais - MEI)
In December 2011, there were 1,895,533 individual entrepreneurs registered in the program. In the first two months of 2012, another 220,113 joined it, totaling 2,115,546 individual entrepreneurs. These microentrepreneurs are mostly engaged in activities such as retail clothing and accessories, hairdressing, cafes, tea houses, juice houses and the like. By registering in the program, they formalize their activities and can issue formal invoices and access social security benefits.
Individual Limited Liability Company (Empresa Individual de Responsabilidade Limitada – EIRELI)
Law 12,441/2011, which was passed in January, makes it possible for individuals to start a business without a partner. By setting up an Individual Limited Liability Company - EIRELI, an individual can be the owner of all the company’s capital. This capital, which must be available in cash, goods or rights, cannot be lower than one hundred times the minimum wage, i.e. R$ 62,200 in 2012. The owner’s liability is limited to the company’s capital, so as to protect his or her personal assets. An EIRELI can be compensated for the assignment of proprietary copyrights or right of publicity, name, trademark or voice of its owner, provided that these are related to his or her professional activity.
Reduction of tax burden for Tablets produced in Brazil
Thirteen companies have been authorized to manufacture Tablets in Brazil with tax benefits: 80% reduction in the tax on industrialized products (from 15% to 3%), and exemption from PIS and Cofins contributions (9.75%). In some states, they can also pay a lower value-added tax. To qualify, companies must comply with production and nationalization standards applied to components used in the tablets set by the Federal Government.
Reduction of Taxes on Exports (Desoneração das Exportações - REINTEGRA)
Since December 2011, companies can request a refund of 3% of their export revenues that would otherwise be collected as indirect taxes (CIDE, IOF, PIS, etc.) on Brazilian exports. The Special Tax Refund Regime for Exporting Companies (Regime Especial de Reintegração de Valores Tributários para as Empresas Exportadoras - Reintegra) applies to products whose imported inputs do not cost more than 40% of the export price. For high-technology goods, which require more imported inputs to ensure their competitiveness, this percentage rises to 65%. Exporting companies can use the tax refund to offset tax liabilities or request the respective amount in cash. Until February, R$ 86 million in tax credits had been requested.
Since November 2011, a preference margin of up to 8% for prices charged by domestic suppliers in government procurement of clothing, footwear and artifacts for uniforms has been in effect.
Reduction in payroll contributions
Since December 2011, Employer Pension Contribution rates for some sectors are being calculated as a percentage of gross revenue, replacing a 20% flat rate on the payroll. This percentage is 2.5% for information technology and communication (IT and ICT) companies and call centers and of 1.5% for companies operating in the apparel, leather and footwear industries (Law 12,546/11).
Credit for innovation
In 2011, FINEP - Brazilian Innovation Agency - released funds amounting to approximately R$ 1.75 billion in loans at subsidized interest rates for companies engaged in innovation projects. This amount represents an increase of about 44% over the previous year. In addition, 104 new credit operations amounting to approximately R$ 2.0 billion were carried out. FINEP’s operational policy is focused on the following priority areas: information and communication technology, renewable energy, oil and gas, defense and aerospace industry, health care, social development and assistive technologies.
Credit for production: change in credit lines operated by BNDES
• Extension of the Investment Support Program (Programa de Sustentação do Investimento - PSI) to December 2012, with the inclusion of new sectors and programs: parts and components, ICT (Information and Communication Technology) equipment produced in Brazil with national technology, hybrid buses, Proengineering and Innovation in Production;
• Inclusion of the auto part industry in the Revitalize Program to support sectors more affected by the appreciation of the Brazilian currency.
National Fund on Climate Change – Climate Fund
Applied in pioneering ways in support of projects, research and financing of climate change mitigation and adaptation actions, the Climate Fund is one of the main instruments of the National Policy on Climate Change. Its support is available in two modalities: non-reimbursable funds and financing. In 2012, the Fund budget amounts to R$ 560 million for loans through the BNDES and to R$ 30 million for non-reimbursable support.
Non-reimbursable funds supported 23 projects in areas such as combating desertification, early warning systems for natural disasters and technological development in 2011.
The financing modality, operated by the BNDES at 2.5% interest a year, has been available since February 2012. It is focused on projects in the areas of technological innovation, energy-efficient machinery and equipment, new renewable energy sources, investments in transportation modals and in improving urban mobility, among others.
For further information, visit www.bndes.gov.br (on the financing modality) and www.mma.gov.br/ fundoclima (on non-reimbursable funds).
TAX REDUCTION TO STIMULATE GROWTH
Class A energy efficiency white goods: reduction in the Tax on Industrialized Products (Imposto sobre Produtos Industrializados - IPI) as of December 2011.
Furniture items, PET laminates, wallpaper, lamps and chandeliers: reduction in the Tax on Industrialized Products as of March 2012.
Food products: reduction in charges of the Social Integration Program and Contribution for Social Security Financing (Programa de Integração Social and Contribuição para o Financiamento da Seguridade Social - PIS/COFINS) as of December 2011.
Special Taxation Regime for Construction (Regime Especial de Tributação da Construção Civil - RET): Real estate developers involved in the My House, My Life program were granted a tax reduction under the Special Taxation Regime for Construction (Regime Especial de Tributação da Construção Civil - RET), from 6% to 1% as of December 1, 2011. Companies can now pay the RET tax on their revenue as a single tax that replaced the PIS/ Cofins contributions, the corporate income tax and the Social Contribution on Net Profit (Contribuição Social sobre o Lucro Líquido - CSLL).
CHANGES IN THE TAX ON FINANCIAL TRANSACTIONS (Imposto Sobre Operações Financeiras - IOF) FOR FOREIGN INVESTMENT AND CONSUMER CREDIT
To reduce the cost of credit for individuals, thus stimulating the domestic market, the Tax on Financial Transactions (IOF) was reduced from 3% to 2.5% a year. For foreign investment, measures were taken in December 2011 and February and March 2012 to manage the foreign exchange flow vis-a-vis the international crisis. With these measures, the government discouraged the entry of short-term capital derived from excessive international liquidity and preserved incentives for capital intended to finance private productive activities.
FUNDING FOR FUEL ETHANOL STORAGE
With the aim of ensuring a regular supply of fuel ethanol, reducing price volatility, a credit line was created to finance its storage. R$ 4.5 billion have been made available by BNDES and Banco do Brasil for this purpose to be used by plants, distilleries, producer cooperatives, and ethanol trading companies and distributors registered with the National Petroleum Agency. This credit line will be available from May 1, 2012 to November 30, 2012 in the Mid-South region and from September 1, 2012 to February 28, 2013 in the other regions of Brazil, at 8.7% annual interest rate.
RESTRUCTURING OF THE BRAZILIAN COMPETITION POLICY SYSTEM
Law 12,529, which restructures the Brazilian Competition Policy System, was passed in December 2011. The Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica - Cade), an independent government body linked to the Ministry of Justice, will be in charge of analyzing and judging mergers and acquisitions and for taking action to prevent and repress offenses against the economic order. Mergers must now be submitted to CADE before being consummated. Before that law was passed, companies were only required to notify CADE about a merger 15 days after it was consummated, which made the process inefficient from the public interest standpoint and inefficient from the economic point of view.
BROADBAND AVAILABLE AT R$35 IN 692 MUNICIPALITIES
In January 2012, 692 municipalities already had broadband available at R$35. In states that exempted broadband providers from the value-added tax (São Paulo, Rio de Janeiro, Espírito Santo, Paraná, Goiás, Pernambuco and Pará) the cost of the connection is R$29.90. Connections are 1 Mbps (megabits per second).
NEW RULES FOR COMMERCIAL RADIO AND TV CONCESSIONS
Since January, new rules are in force for tenders for commercial radio and television broadcasting, as determined by Decree 7,670/12, speeding up the process and making it more efficient. Those interested in a concession for commercial broadcasting must confirm their financial and technical capacity to provide the service, prepare an investment project indicating the source of the funds that will be used for this purpose and submit documents supporting the good repute of the company and its partners. Companies that win such tenders must pay for the concession and have their installation project approved before submitting the process to Congress for ratification. Once the operation is approved, they can start providing the service. New criteria for evaluating proposals have also been adopted, such as the time allocated to local and independent programs, with the aim of promoting the regionalization of cultural, artistic and journalistic production and independent productions.
10 MILLION WORKERS REGISTERED WITH THE MORE EMPLOYMENT (MAIS EMPREGO) PORTAL
In operation since September 2011, the More Employment portal, a system connecting the Unemployment Insurance Program to labor training and intermediation activities, has assisted 10 million workers already. Once registered, workers just have to access http://maisemprego.mte.gov.br for information on unemployment insurance, salary bonuses, training courses and job opportunities. Currently, 775,000 companies are posting jobs on the portal.