With the purpose of ensuring the feasibility of the events related to the 2016 Olympic Games and 2016 Paralympic Game ("Events") in the City of Rio de Janeiro, the Brazilian Federal Government enacted Law No. 12,780, on January 9, 2013, which introduced a combination of federal tax exemptions applicable to both individuals and corporate entities.
This edition of the Olympic Context concerns tax benefits.
- Benefits Granted to Operations
Similar to the guidelines adopted in order to make the 2014 World Cup feasible, the Federal Government has chosen to concentrate the granting of tax benefits in operations performed by entities directly related to the organization of the Events: the Comité International Olympique ("CIO"), the International Paralympic Committee ("IPC") and the 2016 Rio Olympics Organizing Committee ("Rio 2016"), responsible for individuals and corporate entities involved in the necessary operations to perform events of this magnitude (jointly, "Organizing Entities").
Notwithstanding the above, the tax benefits provided for in Law No. 12,780/13 may also be extended to corporate entities that are indirectly related to the Events, including media enterprises and certified broadcasting companies, official sponsors and companies providing services to CIO and Rio 2016, upon proof of their contractual ties to the Organizing Entities (jointly, "Related Entities").
In order to be entitled to the fiscal benefits granted by the Federal Government, the foregoing corporate entities shall also present a formal request to the Brazilian Internal Revenue Service ("IRS"), pursuant to the terms set forth in the Normative Rule No. 1,335 of January 26, 2013.
- Import Duty Exemption
As a way to reduce the costs involved in the importation of consumer goods required to host the Events, the Organizing Entities and Related Entities were granted an exemption of certain federal taxes levied over the importation of goods or services used in activities directly related to the organization or performance of the Events.
According to the Law No. 12,780/13, such category shall be comprised of merchandise with a lifespan of up to one year, of the kind and in quantities usually used in sporting events of the same magnitude, such as trophies, medals, signs, statuette, badges, banners, flags and other commemorative objects, advertising material, brochures, flyers and other goods with similar purpose.
Thus, the importation of such goods can be cleared through customs exempt from the following taxes: Import Duty ("II"), Excise Tax ("IPI"), Contribution to the Social Integration Plan (PIS), Contribution for Social Security Financing ("COFINS"), Contribution of Intervention in the Economic Domain ("CIDE- Combustíveis") and royalties ("CIDE- Royalties"), as well as any owed customs fees.
- Suspension of Import Duty
With a purpose similar to that of the benefit described in item 2.1 above, the Federal Government has also decided to unburden the importation of goods and durable equipment to be used in the Events, when performed by the Organizing Entities and the Related Entities. In this case, such goods and equipment can be allowed into the Country under the Special Customs Regime of Temporary Admission, with full suspension of the payment of levied taxes.
The implementation of this system may cover durable goods, such as, sports equipment, technical recording and sound system devices, medical equipment, and technical office supplies and equipment.
The suspension of taxes on the importation of durable goods is subsequently converted into exemption, provided that it is proven that such goods have been used in the Events and, within 180 days, as from December 31, 2017, are re-exported or donated to the Union or to charities or sport related nonprofit organizations.
- Suspension of the Contribution of Social Integration Program (PIS) and Contribution to Social Security (COFINS)
Finally, so as to reduce the costs resulting not only from the importation of goods and services, but also from local operations, the Federal Government has also granted the Organizing Entities and Related Entities a suspension of the PIS and COFINS levied on the sale of goods and services within the local market, provided that such goods are exclusively used towards the organization or performance of the Events.
However, we highlight that Law No. 12,870/13 limits the suspension of PIS and COFINS to the goods acquired directly by the corporate entities previously licensed or appointed by CIO or Rio 2016, as well as authorized by the IRS.
This benefit does not prevent the sellers or service providers from upholding the credits of the PIS and COFINS arising out of the operations performed with the aforementioned suspension.
The suspension of contributions is then converted into full exemption, based on the following assumptions:
- With respect to non-durable goods and services - upon proof that such goods and services have been used and consumed in the Events;
- With respect to durable equipment - upon proof that such goods have been used in the Events and, within 180 days, as from December 31, 2017, are re-exported or donated to the Union or to charities or sport related nonprofit organizations.
In the event the conditions above are not fulfilled, the Organizing Entities and Related Entities shall collect, as co-obligor, the unpaid duties as a result of the suspension, plus interest and late payment penalties calculated as of the acquisition date.
- Benefits Granted to Corporate Entities
CIO and Rio 2016 (as well as corporate entities directly controlled by these two entities) were granted full tax exemption by the Federal Government. Therefore, in addition to the foregoing tax exemption in operations related to the goods and services, such entities were also granted exemption from other federal taxes.
- Breach of Conditions
As a form to suppress any abuse in connection with the tax benefits provided for in Law No. 12,780/13, the Federal Government, in conformity with the understanding used in connection with the tax relief granted for the performance of the World Cup, has determined that the breach of the conditions shall subject the beneficiaries or legal representatives to the payment of all taxes and legal additional charges, as well as of the applicable penalties.