The Brazilian Government has published a decree which many see as the first concrete step by the new government to encourage both domestic and international investment in infrastructure.

Decree n° 7.603, published in the Official Federal Gazette on November 10, regulates the measures for investor companies with infrastructure projects that intend issuing debentures within the special tax system created in December last year.

Under the system, individuals and foreign investors who apply for debentures to finance projects which the Government considers to be priority, will be exempt from Income Tax. Special Purpose Companies (SPEs) focusing specifically on infrastructure projects meanwhile will pay a fixed income tax rate of 15% on the income from these debentures – an attractive cut considering that tax on income obtained from debentures is normally 34%.

Upon assuming office at the beginning of the year, President Dilma Rousseff established seven infrastructure sectors as 'priority' areas: logistics and transport, urban mobility, energy, telecommunications, broadcasting, sanitation and irrigation. The measures announced last week are being seen as the penultimate step in the new government's first concrete move towards attracting real investment in these areas.

The last piece in the jigsaw is for the individual ministries to work together on the drafting of a standard form to be used by those wishing to register their infrastructure projects under the new system.

It should further be noted that the Decree has also set a limit for the issue of debentures by SPEs, for the implementation of approved infrastructure projects, of December 31, 2015.

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