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).
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