Brazil lawmakers pass bill to overhaul foreign profit tax

BRASILIA, April 1 Tue Apr 1, 2014 10:22pm EDT

BRASILIA, April 1 (Reuters) - Brazil's lower chamber of Congress approved legislation on Tuesday that simplifies taxation on the profits earned abroad by Brazilian companies, but also raised corporate worries.

The legislation proposed last year by President Dilma Rousseffs leftist government has been opposed by some business groups that say firms will be taxed twice, at home and abroad.

The Rousseff administration argues that the bill will bolster investment by giving Brazilian companies more time to pay their taxes on foreign profits.

Last year, the government received billions of dollars in back taxes from Brazilian companies with foreign subsidiaries as part of a settlement program known as Refis.

The legislation maintains the 34 percent corporate income tax charged on foreign profits of Brazilian companies, but allows them to defer payment for eight years. Companies will be able to deduct taxes on profits and dividends paid abroad.

Among the companies likely affected by the bill are iron-ore miner Vale and construction firm Odebrecht.

The bill still needs to clear the Senate before Rousseff can sign it into law. The rules enter into effect from Jan. 1, 2015, though companies may choose to adhere to them this year.

A number of unrelated amendments to the bill were excluded from Tuesday's vote and are due to be discussed on Wednesday.

One such proposal, to apply the PIS/Cofins tax on soybean sales to some domestic buyers, is not likely to pass, a spokesman for the agricultural lobby in Congress said.

Carlo Lovatelli, head of crushing association Abiove, told Reuters the amendment would not affect soy exports but would increase costs for the entire production chain and was opposed by Abiove's members. (Reporting by Alonso Soto, Anthony Boadle and Caroline Stauffer; Editing by Eric Walsh)

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