Tax reform should facilitate investments in Brazil
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Approved on Friday, July 7th, in the Chamber of Deputies, the reform aims to simplify the national tax system. The Brazilian Trade and Investment Promotion Agency (ApexBrasil) celebrates the advances of the constitutional amendment proposal (PEC), which is expected to make Brazil a more competitive and even more attractive destination for foreign investments.
The measure has been under discussion for over 20 years and proposes replacing taxes applied to all stages of the production chain in Brazil. The reform reduces the complexity of the rules, instability, and tax burden, increasing transparency and benefiting Brazilian and foreign entrepreneurs.
According to the Agency’s Business Director, Ana Paula L. A. Repezza, the reform could represent a new dynamic in foreign investments directed towards Brazil, especially regarding opportunities related to energy transition. “The simplification of the tax system will bring more rationality to our business environment, enhancing the advantages that Brazil already enjoys in attracting investments increasingly focused on decarbonization”, she emphasizes.
The Brazilian tax system is one of the most complex in the world, and one of the main obstacles to its national economy’s sustained growth. With the simplification aimed by the reform, foreign investors gain clarity about tax rules, the amounts charged, and the point in the production chain in which they will be applied, all of which translates into legal certainty, transparency, and a reduction in the “Brazil cost”, decisive factors in choosing Brazil as an investment destination.
Foreign Direct Investment (FDI) means the inflow of foreign currency into the Brazilian Balance of Payments, representing an important source of private financing for projects. In addition to contributing to a positive balance of payments, FDI has benefits such as job creation, the transfer of skills and technology, access to global value chains, and the potential to positively impact Brazilian exports.
Results of 2022
In 2022 Brazil was the world’s 5th largest destination for foreign direct investments, according to the World Investment Report published by the United Nations Conference on Trade and Development (UNCTAD). Foreign investment inflows increased by two-thirds, reaching US$ 86 billion, the second-highest value in the time series. Thus, the country rose in the global ranking compared to 2021.
ApexBrasil directly participated in the announcement of 30 investment projects in 2022, amounting to US$ 7.4 billion. In line with the global trends indicated in the report, the Agency is already developing programs and projects to attract foreign investment in infrastructure, renewable energy, and agribusiness. Last year, these three sectors were responsible for about half of the projects facilitated.
The tax reform approval is a positive indication for international investors that, after decades of discussion, Brazil is trying to modernize and move closer to rules adopted by other countries. The potential to attract foreign investments after adopting the tax reform will be multiplied. It may put Brazil alongside economies such as the United States, China, and Singapore, today’s top recipients of FDI.
Notes: The Brazilian tax system is one of the most complex in the world and one of the main obstacles to its national economy’s sustained growth. With the simplification aimed by the reform, foreign investors gain clarity about tax rules, the amounts charged, and the point in the production chain in which they will be applied, all of which translates into legal certainty, transparency, and a reduction in the “Brazil cost”, decisive factors in choosing Brazil as an investment destination.
Source: Invest in Brazil
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