On February 19, the Executive Branch presented the Chamber of Deputies with a bill modifying the Knowledge Economy Law, which aims “to achieve a more progressive, equitable, federal and solidary law, accompanying the goals of the Law of Social Solidarity and Productive Reactivation in the framework of the Public Emergency.” These are the highlights:
Regarding companies that wish to register as beneficiaries:
- 70% of total income for the last year must come from activities promoted by the law.
- The pursuit of activities to incorporate knowledge resulting from scientific advances must be proven.
- Two of these benefits must include the continuous improvement, proving the training of employees or investment in research and development, and/or prove the implementation of exports of goods and/or services arising from the development of any of the activities promoted.
Regarding companies already registered as beneficiaries:
- Proof must be provided every two years that the company is complying with tax and social security obligations as well as the requirements for the activities promoted.
Regarding tax benefits:
- Benefits may be enjoyed as long as they are appropriately verified.
- As from the second year of validity, a fiscal quota may be established through Tax Credit Bonds.
Regarding employer contributions:
- Beneficiaries may convert 70% of the employer contributions into a one-time transferable tax credit bond.
- Beneficiaries may convert 80% of employer contributions into a one-time transferable tax credit bond in the case of the new, duly registered employment of women, professionals in engineering, the hard or natural sciences, persons living with disabilities, residents from “vulnerable areas and/or provinces with a lesser relative development”, and/or beneficiaries of social plans.
Regarding Income Tax:
- Beneficiaries will have a 60% reduction in the total amount of income tax corresponding to the activities promoted.
Regarding withholding tax:
- Beneficiaries performing export operations in relation to the activities promoted shall not be liable to withholding tax or VAT.
This initiative was included in the agenda of the extraordinary sessions (Decree 111/2020), to be dealt with immediately.
The Knowledge Economy Law (Law 27,506) was passed in 2019 and provides a tax framework for software, audiovisual production and post-production, biotechnology, biochemistry, microbiology, bioinformatics, neurotechnology, the agricultural industry, and robotics, among others.