Problems relating to Trade and Investment on Brazil
13. Finance |
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Issue |
Issue details |
Requests |
Reference |
| (1) Complex, and Frequently changing Financial/Taxation Systems and Regulations | - Tax on financial transactions (IOF) and systems related to foreign exchange are extremely complex and changed frequently. Moreover, these systems change very often. The tax exemption period has been extended from the previous more than 90-days to more than 180-days (as of the year-end 2014). (Since 4 June 2014, it has been deregulated to 180-days.) | - It is requested that GOB: -- simplifies the regulations, and -- further abridges the exemption period. |
- Law 7853 (5 December 2012) |
| (Improvement) - GOB promulgated Decree No.7,751 of 14 June 2012, in the Diario Oficial, releasing the change in Regulation on IOF Levy. GOB collects IOF upon borrowing of foreign currency by domestic enterprises or upon inflow into Brazil of the foreign fund from the bond issued abroad. The Decree sets forth the taxable transactions in accordance with the borrowing periods or the redemption periods. The amendment of the Regulation this time has cut down approximately the period from less than 5-years to less than 2-years (expressly stated as 720 days in the Decree), while the tax rate remains at 6%. The Decree became effective on the same day as the date of promulgation. (JETRO Business News) |
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| (2) Preferential Financing Scheme for Products | - Preferential domestic products financing scheme: - BNDES (The Brazilian Economical and Social Development Bank) offers low-interest and long-term financing so that other means of fund procurement is less attractive to basic infrastructure overhaul projects, blocking diversification in the means of fund procurement. On the other hand, BNDES loan is based upon local Brazilian procurement, unsuitable for infrastructure overhauls projects, employing the latest machineries and equipment unavailable in Brazil. - It appears that financial institutions apply favourable interest rates to the dealers who purchase goods from enterprises with local manufacturing facilities in Brazil. |
- It is requested that GOB deregulates currency control (real transactions rules), or builds up financial schemes readily capable of risk hedge in foreign exchange, toward facilitating handling of foreign currency. - It is requested that GOB both confirms and provides the latest related information. |
- FINAME |
| (3) Difficulty in Intra-Group Cash Management Service | - Within a group of companies, should surplus funded companies and deficit ridden companies wish to minimise, as a group of companies, outflowing cost and to enhance capital funding efficiency, due to the existence of IOF (Tax on Financial Operations), taxable upon financing or inter-account move of fund, such kind of service has not yet materialised. It remains difficult to construct within an enterprise (a group of companies) its own cash management service. | - It is requested that GOB overhauls legislative system that enables cash management service by financial institutions and enterprises. | |
| (4) Restricted Cross-Border Fund Transactions within a Group of Companies | - The minimum term requirement (of 180 days as of January 2015) exists on intra-company offshore financing from abroad. | - It is requested that GOB takes step to repeal the minimum term requirement or further reduces the minimum period. | |
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