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06/23/2015
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UNICA Statement on Changes to Brazil Tax Policy on Imported Ethanol

The Brazilian Sugarcane Industry Association (known by the acronym “UNICA”) issued the following statement regarding changes to Brazil’s tax policy on imported ethanol. It should be attributed to Elizabeth Farina, UNICA President.

Brazilian President Dilma Rousseff yesterday signed a decree creating tax parity between domestic and imported products, including ethanol.

Ethanol produced in Brazil is subject to a range of federal taxes with revenue allocated to social security, including the social participation program (PIS) and social security financing contribution (COFINS) on domestic production.  Today’s action by President Rousseff will level the playing field between Brazilian sugarcane ethanol and imported biofuels by subjecting foreign renewable fuels to comparable taxation and should not be confused with an importation tariff.

Today’s decree raises the PIS and COFINS on a number of imported products, including ethanol. These taxes will increase from the current 9.25 percent to 11.75 percent (2.1 percent PIS and 9.65 percent COFINS).  Imported ethanol was exempted from the same level of taxation as domestic products in 2013, but this action resulted in accumulated costs for domestic producers with no commensurate costs for foreign producers.

It is important to note the PIS and COFINS paid on ethanol imports will turn into a credit for the importer, which may then be used to pay other tax debts or be reimbursed by the Brazilian government, having the effect of anticipated taxes that would already be collected.

Brazilian sugarcane producers have long been strong advocates of removing trade barriers and creating tax parity for renewable fuels.  Today’s action continues that tradition.  Working together, the United States and Brazil have built a thriving global biofuels trade benefiting both countries, and we look forward to continued progress toward shared environmental and economic goals.

Leticia Phillips