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Foreign Investors Take Advantage of New Tax Cuts in Brazil

Posted on the 19 April 2013 by Angelicolaw @AngelicoLaw

Foreign and domestic companies considering making significant investments in Brazil have a new reason to be optimistic. That’s because Brazil has continued to make new economic moves that are expected to boost investment and speed economic growth.

In April of 2012, Brazil’s government unveiled a new package of tax cuts, low-cost credits, and other financial relief for ailing industries. The goal was to breathe new life into an economy that was growing far less than expected. Those measures were in addition to 5 consecutive years of interest rate cuts.

In April 2013, the government announced a new round of tax cuts amounting to US$2.7 billion in 14 additional sectors that should take effect in 2014. The sectors benefiting from targeted payroll tax cuts include construction, engineering, railways, and shipping.

What Does This Mean for Foreign Investors?

For foreign investors, these tax cuts mean that entry into a growing number of Brazil’s industries has now become more affordable in a few important ways. By working to reduce the cost of living while encouraging domestic production and foreign investment, Brazil is charting a path toward sustained economic growth.

Brazil Continues to Lower Taxes on Consumer Goods

The tax cuts aimed at stimulating the economy by boosting production and consumption include the elimination of tax on smartphones, including iPhones and Samsung Galaxy models. This move is expected to reduce the price of smartphones sold in Brazil by as much as 30%. Recent cuts follow earlier tax cuts on cars, computers, home appliances, and food staples.

Brazil Is Focused on Increasing International Competitiveness

Over the years, Brazil has earned a reputation for placing heavy tax burdens on the business class. The tax burdens combined with its notoriously complex bureaucracy have been identified as contributing to Brazil’s slow rebound from the recent global economic slowdown.

One of the goals of the string of tax cuts and other economic measures is to increase Brazil’s competitiveness in international markets. Still, many in Brazil are urging for even deeper changes that will speed up both domestic and foreign investment.

It’s clear that the way for Brazil to attract more investment is to take stronger steps to reduce inflation and the cost of doing business in Brazil. As the cost of doing business in Brazil continues to drop, it’s time for foreign investors to take a closer look at business opportunities in Brazil.

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