On 3 August 2006, the President of Brazil, Luis Inácio Lula da Silva, issued the Provisional Measure n. 315 (?MP 315/06?) which, among other innovations, made certain foreign exchange control procedures more flexible.
The following is a brief description of the main changes specifically relating to taxation introduced by the ?MP 315/06?: (i) tax exemption of PIS (Social Integration Program) and Cofins (Contribution for the Financing of the Social Security) over the revenues resulting from services rendered by individuals or corporations domiciled abroad, provided that such earnings remain deposited abroad; (ii) reduction of the withholding income tax rate from 15% into 0% on lease agreements for the acquisition of airplanes or their engines (as set out in the article 1, item V of Law n. 9.481/97), provided that such triggering events occur before 2013; and (iii) the revocation of article 7th, subsection IV, of the Provisional Measure n. 303/06, extinguishing the possibility of the public authorities rescinding the participation of a taxpayer in the tax refinancing program (?REFIS-III?) when such taxpayer has debts to the Employment Guarantee Fund (?FGTS?).
Regarding the National Bank for Social and Economic Development (?BNDES?), the most important change brought about by the ?MP 315/06? was the permission for novation of some agreements that the bank itself entered into with the Federal Government. As a result, the net worth of ?BNDES? shall be raised, thus allowing the increase of its finance operations.
Some other important modifications resulting from the ?MP 315/06? are (i) the simplification and the reduction of costs in export transactions, including the possibility of companies maintaining up to 30% of their export revenue abroad; (ii) the possibility of payment in national currency for goods bought in free trade zones such us free shops; and (iii) the registration in national currency before the Brazilian Central Bank (?Bacen?) of unregistered foreign investment (the so-called ?contaminated capital?) existing in Brazilian companies. The National Monetary Counsel (?CMN?) shall still rule on the cases of foreign investment in national currency that shall be subject to registration before ?Bacen?.