Legal decree wavers tax collection on auto products from Paraguay

The government has submitted Provisional Measure (MP) 1201/23 to the National Congress, which grants amnesty on Import Tax (II) and Industrialized Products Tax (IPI) credits related to imports of automotive products from Paraguay. These credits refer to taxes that would be due but will be subject to remission, meaning an exemption from the obligation to pay.

According to the justification for the MP, the goal is to halt tax collection on imports made before the entry into force of the First Additional Protocol to Economic Complementation Agreement No. 74 (ACE 74) to the Treaty of Asunción.

Brazil had an agreement for the tax-free importation of auto parts from Paraguay, but this was not in effect until the additional protocol was incorporated into the legislation in 2020. The MP extinguished the tax credits owed on these imports before the protocol when the taxes were levied.

The provisional measure grants total remission of tax credits related to II and IPI. The government estimates that the measure will waver approximately R$500 million in tax revenues in 2022, which is included in the 2023 Budget (Law 14,535).

Automotive policy

In justifying the urgency and relevance of the measure, the government emphasizes that the bilateral agreement with Paraguay “marked an important move towards consolidating an automotive policy within Mercosur.” The collection of past tax credits for products that now have a preference margin of 100% could contribute to a setback in this direction, concludes the Executive.

According to the government, the automotive sector is characterized by interdependence in its logistics chain. If these tax credits were not remitted, the collection of import taxes would impact the entire supply chain, “leading to another negative interference in the sector.”

The most important item in the export agenda of the Paraguayan maquila industry is the so-called automotive parts, which represented 26% of total exports in 2022. Brazil is the leading destination for this production, accounting for 62% of Paraguayan exports.

Commission

With the public measure, a mixed committee of Congress members will issue an opinion before opening up the discussion to the plenaries of the Chamber of Deputies and the Senate. The deadline for presenting amendments to MP 1201/23 runs until February 7, 2024. The matter will be processed with urgency and will block the voting agenda from March 17, 2024.

Source: Folha Nobre

Click here to access the original text: https://folhanobre.com.br/2023/12/28/medida-provisoria-preve-perdao-de-impostos-sobre-produtos-automotivos-do-paraguai-noticias-camara-dos-deputados/397828/

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