The Senate approved this Thursday, by 49 votes to 19, the text of the first complementary bill that regulates the tax reform. As changes were made by senators, the project will return to the Chamber for further consideration by deputies – which should take place next week.
The project’s rapporteur, senator Eduardo Braga (MDB-AM), promoted a series of changes to the text. He expanded benefits granted to companies located in the Manaus Free Zone and assigned objective criteria for the taxation of individuals who obtain income from the purchase, sale, assignment and leasing of properties. The senators also made changes to some proposals made by Braga, such as removing the selective tax on weapons and ammunition.
See the main changes below:
Concessions
Braga made concessions to activities that, according to calculations he presented, had an increase of 0.13 percentage points in the standard rate of the new Value Added Tax (VAT), which will replace five current taxes. During voting throughout this week, other concessions were made.
The most significant change was approved yesterday by the Constitution and Justice Committee (CCJ) of the Senate, which equated the special sanitation taxation regime with the health regime. This change should add another 0.38 pp to Value Added Tax (VAT).
There were also other smaller concessions that have not yet been counted. Gyms received a 30% tax discount compared to the reference rate. Pesticides also gained an advantage: their new VAT rate will be reduced by 60%. Cookies for popular consumption were subject to reduced taxation equivalent to 60%.
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Manaus Free Zone
Braga, who was once governor of the State of Amazonas, expanded the benefits granted to companies located in the Manaus Free Trade Zone in relation to the project that had been approved by the Chamber and goes beyond the incentives offered today to companies in the region.
Although the topic was the target of criticism from senators, such as Sergio Moro (União-PR) from Paraná, there were no changes in relation to what Braga presented. On the contrary, in the face of complaints from senators from other states in the Northern Region, Braga extended advantages to free trade areas located in neighboring AC, AP, RO and RR and extended their validity from 2050 to 2073.
The rapporteur also included a provision that grants the only refinery installed in the Free Zone, which belongs to the distributor Atem, tax advantages.
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Weapons and ammunition
The Senate defeated the government’s proposal to reinstate weapons and ammunition in the Selective Tax and decided to keep them out of taxation. The reinclusion of weapons and ammunition was a prominent proposal from the government leader in Congress, senator Randolfe Rodrigues (PT-AP).
When the regulation was approved in the Chamber, weapons and ammunition were already outside the Selective Tax, but Braga decided to introduce them back into taxation. In the Senate CCJ, the opposition managed to approve the exclusion.
Real Estate
The Senate rapporteur assigned objective criteria for the taxation of individuals who obtain income from the purchase, sale, assignment and rental of properties. The Chamber’s text left the issue vague and only covered professionals who would already collect IBS (VAT from states and municipalities) and CBS (federal VAT), as independent professionals.
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Now, every individual who has more than three different properties and earns an income of more than R$240,000 per year from them will be taxed on the lease or assignment. In the case of sales, if an individual sells more than three properties in a year or more than one property acquired in the last five years, they will also be subject to taxation.
In the case of the rate that will apply to these operations, Braga applied higher reductions than those approved by the Chamber. For the sale of properties, the applicable rate will be 50% of the standard VAT rate – which applies to all other products and services. The text that came out of the Chamber provided for a 40% reduction. In the case of rent, lease and assignment, the reduction was increased to 70% – the previous one was a 60% reduction in the standard rate.
Cashback
The text approved by the CCJ expanded cashback (tax refund mechanism for low-income families) for telephone and internet bills. The Chamber’s text already provided for the return of 100% of the CBS (federal VAT) and at least 20% of the IBS (state and municipal VAT) for gas, water and sewage and electricity. For other products and services, the refund will be 20% of CBS and IBS.
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Braga decided to accept the amendment that excludes the section of the article that establishes that there is no Selective Tax on the supply of goods for the specific purpose of export to an exporting commercial company.
The amendment, by senator Weverton Rocha (PDT-MA), excludes a device with the intention of “ensuring the constitutional immunity of exports of mineral goods from Selective Tax”. According to the author of the amendment, taxation of these operations would generate negative impacts.
Agricultural defenders
Braga made a wording adjustment to the opinion to ensure that there is a review every 120 days of the list of agricultural and aquaculture inputs subject to a 60% reduction in CBS (federal) and IBS (state and municipal) rates.
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He also accepted amendments for funeral services, cremation and embalming in the differentiated regime and improvements to the wording of the Selective Tax, including on prognosis competitions. Braga also included a 60% reduction in IBS and CBS rates for performing arts activities.
Sugary drinks and veterinary services
The CCJ also approved yesterday an amendment to remove sugary drinks from the selective tax and the inclusion of veterinary services in a 60% tax reduction.
