Brasília – Lower tax for the purchase of weapons by the Armed Forces of Brazil should be on average 30%, as informed by the Revenue Service on Friday. The percentage corresponds to what suppliers should not have to pay in three taxes: Cofins (social security tax), the Industrialized Product Tax (IPI) and PIS/Pasep.
According to the undersecretary for Taxation at the Revenue Service, Sandro Serpa, incentives to the weapons sector, published on Friday in the Federal Official Gazette, will be not only for the acquisition of products on the domestic market, but also for imported products. Apart from that, the suspension of taxes should cover not just armaments, but also suppliers of raw materials for producers of weapons.
“The defence sector has specific characteristics, like the market concentrated in few producers and just one buyer, the government. Therefore, we were able to extend the special regime to the prior link in the productive chain and also benefit those who sell inputs to suppliers,” said Serpa.
The new tax regime should benefit producers of components, equipment, systems and subsystems for production of war material. The companies that should be benefited by the tax regime should be registered at the Ministry of Defence and at the Revenue Service. To be able to sell at lower taxes, they should have their dues with the revenue service up to date. The government has established an additional condition for suppliers of inputs to be able to make use of the regime. At least 70% of the value of raw material sold each year should be turned to producers who sell to the Armed Forces.
Currently, weaponry producers pay 9.25% PIS/Pasep and Cofins and an average of 20% IPI. According to Serpa, the Revenue Service should lose 3.8 million Brazilian reals (US$ 2 million) a month with the incentive. For 2012, the loss in revenues is expected to reach 49 million reals (US$ 27 million).
*Translated by Mark Ament
