What is it?
Law 11.196/05, known as “Good Law”, was established in November 2005 and provides fiscal incentives to companies that conduct research and development of technological innovation, approaching the relationship between universities and research institutes and the private sector and enhancing the results in R&D.
• Deduction from 20.4% up to 34% in IRPJ – Imposto de Renda de Pessoa Jurídica (Corporate Income Tax) and
CSLL – Contribuição Social sobre o Lucro Líquido (Social Contribution on Net Income) for expenditure on R&D;
• Deduction of 50% in IPI (tax over industrialized products) in the purchase of machinery and equipment for R&D;
• Depreciation and accelerated amortization of such assets;
• Possibility to reinvest the amounts deducted in research and development area;
• Continuous improvement of products, services and processes;
• Greater competitiveness in the market;
• Innovation generation as a lever for organizations growth;
• Be considered an innovative company by MCTI.
Evolution of the Law
In 2012, companies applied R$ 5.34 billion in high-tech risk activities, such as basic and applied research and technological development. The governmental fiscal waiver was R$ 1.04 billion. In 2013, this number nearly doubled and reached R$ 2 billion.
Possible end of the Law
On September 30th, 2015 it was released the Provisional Measure (PM) suspending the benefits of Articles 19, 19-A and 26 of the Good Law, which allow companies and private non-profit science and technology institutions to exclude from the net income, in the determination of the real profit and calculation basis of the Social Contribution on Net Income, the percentage spent on research and innovation.
The PM 694 is part of the package of measures announced by the economic team of the federal government to minimize the budget deficit, estimated at R$ 30.5 billion in 2016, and give security to achieve the primary surplus target of 0.7% of the Gross Domestic Product (GDP) next year. The measure, if approved when voted on, shall enter into force in 2016.
The economy with the embargo of tax benefits of Good Law will be approximately R$ 2 billion.
The Good Law resources are linked, on average, to 50.8% of the RD&I projects of companies using the benefit, and support, exclusively, the work of 52% of its researchers.
• Its suspension has potential impact of generating exodus of RD&I global centers;
• Consolidates an image of legal uncertainty and instability of the Brazilian funding instruments for ST&I;
• It will generate a reduction in RD&I Brazilian portfolios and bodies of researchers in companies;
• Affects long-term research projects;
• Scratches the country’s image with institutions that were investing here and can ward off new investments;
• Besides the suspension of the Good Law, the PM also increases from 15% to 18% the aliquot of Income Tax on the distribution of interest on shareholders` equity to stockholders and business partners.