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10.5.1. Locational Concessions

Tax holidays are offered by governments for certain industries located in specific areas. The programmes are administered by two regional agencies, each responsible for specific regions. SUDENE is responsible for the North-east region which encompasses following states:Alagoas, Bahia, Ceará, Espírito Santo, Maranhão (part), Minas Gerais (part), Paraíba, Pernambuco, Piauí, Rio Grande do Norte, Sergipe. SUDAMon the other hand is responsible for legal Amazonia, and covers the following states:Acre, Amapá, Amazonas, Maranhão (part.), Mato Grosso, Pará, Rondônia, Roraima, Tocantins.


In general, incentives are available to both local and foreign-controlled companies. However, the granting of incentives is subject to approval by the federal government agencies SUDENE and SUDAM in respect of the implementation of new industrial projects or the planned expansion,diversification or improvement of an existing industry. SUDENE and SUDAM evaluate not only a project’s technical and economic feasibility, but also its suitability as part of the region’s overall economic development strategy.

Tax Incentives

For the Northeast and Amazon regions, the investment incentive plans administered by SUDENE and SUDAM, respectively, offer certain fiscal benefits to companies operating approved projects. These are as follows:

  • 75% reduction of the income tax and non-refundable surcharges due on operating profit ( lucro de exploração), for a maximum period of ten years, for implementation,expansion, diversification and improvement projects submitted and approved from 24 August 2000 to 31 December 2018, relating to economic sectors considered to be a priority for the development of these regions.
  • 12.5% reduction of income tax and non-refundable surcharges, from 1 January 2009 until 31 December 2013, for legal entities which maintain economic enterprises that participate in the development of these regions. Legal entities which own such projects may apply for the above mentioned reduction of 75%, within a period of ten years, provided that their activities fall into economic sectors considered by the government to constitute a priority for the development of these regions.

The corporate income tax reduction cannot be distributed to the company’s quota holders/shareholders and must be booked and kept as a subsidy reserve (capital reserve), to be used only for capital increases or offsetting existing losses.Certain state VAT (ICMS) incentives are also made available to certain businesses, depending on the nature and peculiarities of the project.