Provisional Measure (PM) 1516 of 29 August 1996 amended the rules on corporate taxation. Effective for tax periods beginning on or after 1 January 1997, the social contribution may not be deducted either for income tax purposes or for purposes of calculating the taxable base of the social contribution itself. The following is an example of the effective corporate tax burden:


Net profits                           1,000,000
Social contribution (8%)                (80,000)
Taxable base for CIT and AIR          1,000,000
15% CIT                                (150,000)
10% AIR (from BRL 240,000)              (76,000)
Total effective corporate taxes         306,000
Amount available for distribution       694,000

In addition, the social contribution rate for financial institutions is fixed at 18%.

In order to be effective, the Provisional Measure must be ratified by a law or re-issued every month until the congress approves it.

This article was correct as of 1 April 1997.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Carlos S Romero, Deloitte Touche Tohmatsu, Sao Paulo, Brazil on Tel: +55 11 257 0122, Fax: +55 11 258 8456