New Tax Incentives for Technological Innovation

by Carlos Eduardo Eliziário de Lima

December 01, 2008


Besides other important changes implemented in the federal tax legislation, Law No. 11,774, published September 18, 2008, amended some provisions of the so called Lei do Bem, or Good Law, (Law No. 11,196/2005), creating new incentives for technological innovation.

The first change under Law No. 11,774 refers to Article 17 of the Good Law. Said provision was amended to establish a system of full depreciation in place of accelerated depreciation for new machines, equipment, devices and instruments used for technological innovation activities.

Thus, fixed assets used for technological research and development of technological innovation may be now fully depreciated at the year they are purchased, not only for the purposes of calculating the corporate income tax (IRPJ), but now also for calculating the Contribution on Profits (CSLL).

Another relevant change brought by Law No. 11,774 results – partially if not fully – from the criticism from IT companies on the limitation originally foreseen in the Good Law. In view of said restriction, companies benefited from the Information Technology Law (Law No. 8,248/1991) were prevented from using the tax benefits of the Good Law.

With this recent change, companies engaged in the Information and Automation sectors may now benefit from multiple deduction of expenses related to technological research and technological innovation development for purposes of determining the tax basis (net profit) of the corporate tax and Contribution on Profits. This multiple deduction, initially at 160%, may reach 180% of expenditures depending on the number of new researchers hired by the company (the number is to be defined in future regulation).

In a general sense, therefore, changes to the Good Law brought by Law 11,774 are clearly praiseworthy, since they make the tax incentives for technological innovation more flexible. This is especially important for companies engaged in the Information and Automation sectors, which play an important role in the Brazilian economy.


Carlos Eduardo Eliziário de Lima

Agente da Propriedade Industrial , Advogado

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