Government sanctions law that extends deadlines for exporters in drawback regimes

On September 24, Brazil’s President Jair Bolsonaro sanctioned Law No. 14.060, which allows an exceptional, 1-year extension on the deadlines for complying with suspension and exemption drawback regimes. These regimes give tax exemptions on local imports and purchases of inputs used in the production of goods for the foreign market.  The new legislation originated from Provisional Measure 960, issued on May 4 this year, and is part of an effort to reduce the impacts of the COVID-19 pandemic on the Brazilian economy.

In addition to confirmation of the original PM 960 text, which allowed for an exceptional extension of compliance periods only for the suspension drawback, the law published on the 24th extends this benefit to the exemption drawback regime as well. This modification to the measure seeks to avoid a scenario whereby Brazilian companies that hold concessional acts of exemption drawback with non-extendable maturity in 2020 are unable to replace the stock of inputs to similar levels as previously needed to produce goods for export, within the originally established term, due to the reduction in economic activity in Brazil and abroad caused by the coronavirus. This is because carrying out these operations at this time could compromise the companies’ working capital without providing them with the corresponding inflow of revenues in the short term.

Data from the Secretariat of Foreign Trade of the Ministry of Economy (SECEX/ME) noted 325 concessionary drawback exemption acts expiring this year and authorized replacement of inputs in the order of US $ 942.3 million. Of this authorized amount, the amount of US$ 424.9 million (about 45% of the total) refers to operations that, with the new law, may now be carried out in 2021.

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