Brazil changes tax policy for imported ethanol

By Erin Voegele | June 23, 2015

UNICA, the Brazilian sugarcane association, has announced the country has made changes to its tax policy on imported ethanol. According to a statement issued by Elizabeth Farina, president of UNICA, Brazilian President Dilma Rousseff signed a decree on June 22 creating tax parity between domestic and imported products, including ethanol.

In the statement, Farina explains that 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. She also stressed that the decree’s action in leveling the playing field by subjecting imported biofuels to the comparable taxation as domestically produced sugarcane ethanol should not be confused with an importation tariff.

“Today’s decree raises the PIS and COFINS on a number of imported products, including ethanol,” Rousseff. “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.”

In her statement, Rousseff also indicated that 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,” Rousseff continued. “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.”

The most recent monthly fuel ethanol export data published by the U.S. Energy Information Administration shows the U.S. exported nearly 2 million barrels of ethanol in March, with 598,000 barrels of that volume destined for Brazil.

Historical EIA data shows monthly U.S. ethanol exports to Brazil have ranged widely since 2010, from lows of zero to a high of 1.75 million barrels reported for December 2011.