Brazil issued Provisional Measure No. 1,227 on 4 June 2024, which imposes constraints on Brazilian taxpayers seeking to monetize value-added tax (VAT) credits. The measure aims to reduce the financial impact of the payroll tax relief policy extension for companies and municipalities. It limits the compensation related to the Program of Social Integration (PIS) and Contribution for the Financing of Social Security (COFINS) for affected taxpayers. This affects those who recognize PIS/COFINS credits due to a final judicial decision, enjoy presumed credits of PIS/COFINS, and have tax-relieved revenue. The restriction primarily affects the pharmaceutical, food production, and petrochemical sectors, and it means that certain credits can no longer be used to offset other federal taxes.
Source EY
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