The Drawback Regime was created in 1996 by the Brazilian government with the purpose of suspending import taxes of raw material intended to the manufacturing of exporting goods. Legislation has improved over time and today the regime can also be applied to raw material bought within the domestic market, as long as the production is bound to exports.
Tax suspension is applied to the following taxes: Import Taxation (II); Industrialized Product Taxation (IPI); Contributions to the Social Inclusion Program, Formation of Public Servant Patrimony and Social Security Financing (PIS/Pasep/Cofins); Additional Freight for the Renewal of the Merchant Navy (AFRMM); and Circulation of Goods and Services Taxation (ICMS).
In order to adopt the Drawback Regime, the company needs to be licensed for international trade operations (Radar) by the Brazilian Federal Reserve and file a request within SECEX (Federal Secretariat of International Trade),assuming the commitment of exporting production after transforming the raw material which is to be applied to the program. SECEX will then authorize the purchase of the raw material either from the domestic or foreign markets. This operation is registered through SISCOMEX, the Brazilian Integrated International Trade System utilized for all national import/export operations control.
The Drawback tax exemption regime may be applied to product transformation, processing, assembly and renovation or refurbishing of exports from any economic segment. Company may also file a request to purchase tax exempt raw material that is intended to replace inventory that has been used for the production of previously exported goods. The company benefiting from the regime may not necessarily be the company exporting the product, whereas it can be exported by an intermediary company such as a trading company or another manufacturing company that has used the product for further complex production.
More information can be found through the following links: