Brazil launches community consultation on charging true estate tax on concession assets

Brazil’s public prosecutor (AGU) begun a community consultation on imposing serious estate tax IPTU on services linked to concessions, including in the infrastructure segment.

Typically, home owners shell out the municipal IPTU tax every year, which finances community authorities. In idea, the tax amounts to 1% of assets worth, but in actuality it is generally .5% owing to exemptions.

In particular airport concessionaires have opposed the tax, as municipalities experimented with to charge it.

“The general public session is dependent on a demand received by the AGU’s chamber for the promotion of authorized certainty in the enterprise environment (Sejan) produced by the Nationwide Transportation Confederation, but which impacts several sectors. Sejan operates to discover circumstances of lawful uncertainty and propose methods to really encourage investment in the nation,” AGU claimed in a statement.

“The most important issue of the discussion is no matter whether the tax ought to be paid by the organization that offers the general public services, even when there is no provision for this form of payment in the bidding studies or in the companies’ enterprise system, or whether the reciprocal tax immunity provided for in the structure handles houses that are part of general public provider concessions and permissions,” the assertion said.

The consultation will stay open up by means of Could 22. Feedback will be been given from folks and authorized entities, these kinds of as afflicted agents and associations symbolizing municipalities, states and infrastructure concessionaires.

After the general public consultation, AGU will announce an formal stance on the concern.

“A official opinion from the AGU, being a federal authorities human body, has the electric power to provide as a important legal basis for neighborhood court docket conclusions, in the situation of metropolis halls deciding to go to court to charge IPTU, which is a municipal tax,” Paulo Dantas, an infrastructure and project financing expert at regulation agency Castro Barros Advogados, told BNamericas.

“In any situation, this dialogue raises important lawful risks for businesses, considering the fact that if there is area for city halls to cost residence tax on airport terminals, for example, in addition to other services from providers that function with concessions, this will stand for an improve in the value of current contracts. Not to point out that foreseeable future concession contracts will also have to include this further charge with IPTU in their economic products, which was previously not considered an situation,” mentioned Dantas.

“Local administrations normally want to collect far more taxes. If the selection of IPTU in concession contracts is approved, also impacting existing contracts, we will see a whole lot of contract re-balancing, given that when the contracts were being offered, there was no provision for IPTU collection,” Alberto Sogayar, an infrastructure attorney at Sogayar e Alcântara Advogados, explained to BNamericas.

“If an IPTU charge is preferred, the very best detail would be to impose a rule that this would only be for new contracts, so investors and operators would incorporate it in their economic versions ahead of bidding.”