The government excludes products manufactured in the Manaus Free Trade Zone from the IPI . reduction

The government excludes products manufactured in the Manaus Free Trade Zone from the IPI . reduction

On Wednesday (24) the government published a decree that excludes products manufactured in the Free Trade Zone of Manaus (ZFM), in Amazonas, from the 35% reduction in the industrial product tax (IPI) rate. The new law was signed by President Jair Bolsonaro (PL) and Economy Minister Paulo Guedes, and published in an additional edition of the Official Gazette of the Union (DOU).

The issuance of the law complies with the decision of Minister Alexandre de Moraes, of the Federal Supreme Court (STF), who, in early August, halted part of the effects of a federal government decree addressing the tax cut on industrial products. (IPI).) (see more below).

Moraes’ decision was taken by the Solidarity Party and the Amazonas government. The minister decided that the 35% reduction in IPI, set by the government in April of this year, would not apply to “products produced by industries in the Manaus Free Trade Zone that have the basic production process”.

Under the free zone rules, industries installed in Manaus are exempt from the IPI, but products manufactured in the Amazon industrial zone lose their competitiveness when rates of similar materials produced in other areas fall to the rest of the country.

For the Ministry of Economy, the measure maintains the competitiveness of companies in the Manaus Free Trade Zone and “ends the legal uncertainty of the national production sector (…) industry.”

Also, according to the ministry, the IPI rates of 170 products manufactured in the region “for the purpose of complying with court decisions” have been restored.

“The decree already has more than one copy, it is in the fourth version, precisely because of the decisions of the Supreme Council with the interests of the Free Trade Zone in Manaus. We are trying to take measures to combine the interest that the free zone enjoys, said Marcelo Guaránez, Executive Secretary of the Ministry of Economy, Which is being challenged in the Supreme Court, along with benefiting the entire economy through tax cuts.

In the list of products that are not affected by the IPI, for example, soda syrup, a lighter, a razor, a cash register, a wristwatch, a ballpoint pen and a dishwasher.

“About 4,000 products have been produced outside ZFM that are being utilized. (…) In total, we will have 170 products [da Zona Franca] whose prices will be restored or remain at the original level since the first cuts in February of this year. Among these 170 products, soda syrup is included,” Yuata said.

The exclusion of focus for beverage preparation from the IPI reduction is the only clause in the decree that will generate a tax effect. According to the government, the assignment is estimated at R$ 164.27 million for 2022, R$ 715.40 million for 2023, and R$ 761.74 million for 2024.

According to the Special Secretary of Productivity and Competitiveness of the Ministry of Economy, Alexander Yuata, for the automotive sector, the decline is continuing by 24.75%.

According to the Economy Ministry, some products manufactured in the Manaus Free Trade Zone will remain excluded from the changes in Wednesday’s decree (24).

According to the folder, the excluded items are not considered significant for the region, according to the production and billing criteria. Therefore, they will continue to reduce 35% in IPI.

“There is nothing in the decree that is in fact irrelevant to ZFM, [entre] Those who are left out and who will suffer a lower IPI, we can mention refrigerators, kitchen stoves, cleaning products and some metal inputs, such as steel, copper, aluminum, chocolate, ice cream, beer, wine and rubber manufactures, explained Glenda Lustosa, Minister of Industry Development, Trade and Services.

IPI is levied on industrial products, and the amount is usually passed on to the consumer in the final price of the goods. Since it is a regulatory tax, it can be changed by presidential decree, without the need for congressional approval.

IPI rates began to change in February 2022, when President Jair Bolsonaro (PL) decreed cuts of up to 25% for most products.

Two months later, the government raised the IPI line reduction to 35%. According to the Ministry of Economy, this expansion did not include most of the products that were also produced in the Manaus Free Trade Zone.

In May, Minister Alexandre de Moraes of the STF responded to a request from the Solidarity Party and suspended the tax cut on products manufactured in the free zone.

At the time, the party argued that reducing the IPI of products from all over the country competing with products from the free zone could reduce the advantage of goods manufactured in Manaus, which already has exceptions.

In response to Minister Moraes’ decision within the scope of this request, the government issued a third decree, in July, setting out the items that will drop by 35% in the IPI rate. The decree excluded from the list the main products manufactured in the Manaus Free Trade Zone.

However, in early August, Alexandre de Moraes suspended the effects of part of the decree published in July, arguing that the IPI reduction imposed by the new decree continued to affect products manufactured in the Manaus Free Trade Zone.

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