Understanding the opportunities offered by RECOF and Drawback

RECOF and Drawback opportunities

Special Customs Regimes offer a different customs control regime for both imports and exports.

Special Customs Regimes offer a different customs control regime for both ...

Understanding the difference between RECOF and Drawback

Special Customs Regimes offer different customs control regime for both imports and exports. RECOF, RECOF SPED and Drawback regimes offer great benefits to their users. Understand the difference and the possibilities offered by each regime:

RECOF (Regulatory Instruction IN 1291)

RECOF consists of a Special Customs Regime of Industrial Warehouse under automated control of Customs Board which allows the beneficiary company to import or to acquire in the local market, raw materials, parts and components destined to industrial application, on which taxes are suspended. Part of these goods must be applied on industrial processes, and it can be subsequently shipped both to domestic and foreign markets. When exporting the finished good, the company terminates the payment of taxes.

Among other benefits granted by the regime are the following:

  • Import or purchase in the local market, raw materials, parts and components on which taxes are suspended.
  • Tax exemption on exports.
  • Cash flow gains when the product is sold in the domestic market. Taxes are suspended until the 10th day of the month after that of the sale.
  • Reduction in storage fees charged by INFRAERO (Brazil's Civil Aviation Authority).
  • Suspension of the AFRMM (Contribution for Renovation of the Merchant Fleet).

Requirements to qualify for the regime:

  • An automated system approved by the Brazilian Federal Revenue Service for controlling all the flow.
  • Tax compliance.
  • Equity equal to or higher than R$10 million.
  • Companies can apply if engaged in: (1) assembling products; (2) transforming, processing and assembling parts and pieces; and (3) packing and repacking products

Commitments made by the beneficiary to remain under the regime:

  • Export manufactured goods with the minimum annual value of 50% of total merchandise imported under the regime, in the minimum amount of US$5 million.
  • Annually apply at least 80% of foreign merchandise purchased under the regime to manufacture goods (this percentage is reduced to 75% if the company exports more than US$50 million and to 70% if the company exports more than US$100 million).
RECOF-SPED

Aligned with the National Export Plan, RECOF-SPED (Special Customs Regime of Industrial Warehouse under control of the Public System of Digital Bookkeeping ) is a special regime that simplifies and expands the possibilities already offered by RECOF, allowing the beneficiary to import or to acquire in the local market, raw materials, parts and components  on which taxes are suspended. Part of these goods must be applied on industrial processes, and it subsequently can be shipped both to domestic and foreign markets. When exporting the finished good, the company exempts the payment of taxes.

Among other benefits granted by the regime, there are:

  • Import or purchase in the local market, raw materials, parts and components on which taxes are suspended.
  • Tax exemption on exports.
  • Cash flow gains when the product is sold in the domestic market. Taxes are suspended until the 15th day of the month after that of the sale.
  • Reduction in storage fees charged by INFRAERO (Brazil's Civil Aviation Authority).
  • Suspension of the AFRMM (Contribution for Renovation of the Merchant Fleet).

Requirements to qualify for the regime:

  • Fulfill the obligations to submit the Digital Tax Bookkeeping (EFD) files.
  • Tax compliance.
  • Companies can apply if engaged in : (1) assembling; (2) transforming, processing; and (3) packing and repacking products. 

Commitments made by the beneficiary to remain under the regime:

  • Export manufactured goods with the minimum annual value of 80% of total goods imported and acquired  under the regime, in the minimum amount of US$5 million (and the percentage is reduced to 50% in the first year of use).
  • Annually process at least 80% of foreign merchandise admitted under the regime, and the index is reduced to 70% for products manufactured for the local market.
Drawback Suspension (Decree No. 37)

Special Customs Regime controlled through Concession Act, allowing the beneficiary company to import or acquire in the local market raw materials, parts and components  used to generate higher added value goods on which taxes are suspended. These goods should be exported or used in a sales transaction equivalent to an export. When exporting the finished good, the company turns the tax suspension into a tax exemption.

Among other benefits granted by the regime are the following:

  • Import or purchase in the local market raw materials, parts and components on which taxes are suspended.
  • Tax exemption on exports.
  • Reduction in storage fees charged by INFRAERO (Brazil's Civil Aviation Authority).
  • Suspension of the AFRMM (Contribution for Renovation of the Merchant Fleet).

Requirements to qualify for the regime:

  • Capacity to control its logistics and production flows.
  • Need for a Concession Act and Import License granted by a competent authority.
  • Companies can apply if engaged in: (1) transforming; (2) processing; (3) assembling; (4) renovating or repacking; and (5) packing or repacking products.

Commitments made by the beneficiary to remain under the regime:

  • Export manufactured goods and fulfill the commitment to use 100% of the goods acquired under the regime.
  • The failure to fulfill the commitment may lead to the punishment of the company, but does not prevent it from using the regime.

> Click here to access the Special Regimes Comparative Chart

Connect with us

 

Request for proposal

 

Submit