Car will only have a discount while the budget reserved by the government lasts

The subsidy program for automakers launched on Monday (5) by the government is already in effect, allowing dealerships to grant discounts on zero kilometer cars at the time of sale.

The program will last as long as there is money to fund it – the government has set aside R$500 million – or up to a maximum of four months. In addition, the benefit does not include cars powered exclusively by gasoline or diesel.

The conditions, which are contained in Provisional Measure (MP) 1.175/2023, are different for light vehicles, trucks and buses.

For passenger cars, the benefit ranges from R$ 2,000 to R$ 8,000 depending on the model. As the government set aside BRL 500 million to fund the discounts, the number of cars sold within the program can vary from 62.5 thousand (in the extreme case in which everyone enjoys the maximum discount of BRL 8 thousand) to 250 thousand (with use of the minimum discount of BRL 2,000 for everyone, another extreme case). Weeks ago, Anfavea, which represents automakers, estimated that the program could raise sales in 2023 between 200,000 and 300,000 units.

The bonus amount is calculated based on four criteria: energy source, energy efficiency, suggested public price and vehicle production density.

Cars that cost up to R$ 120,000 participate in the program, but the discount is greater for the cheapest models, below R$ 70,000.

The MP brings a score table for the total benefit calculation. Electric, hybrid or ethanol-powered cars score more points than flex-fuel models, while those that use only gasoline or diesel are not included in the initiative.

Energy consumption must be a maximum of 2 MJ/km, but there is more discount for cars that spend less than 1.41 MJ/km.

In terms of production density, priority is given to cars with a higher percentage of parts produced locally, which includes domestic items and items from Mercosur countries.

A BRL 70,000 model that meets all the requirements at its maximum levels, therefore, can be purchased for BRL 62,000, a discount equivalent to 11.4% of its original value.

Automaker will finance dealership discount and then will have tax credit

The benefit is granted at the time of sale to the consumer, and the dealership can ask the automaker for reimbursement. The invoice of the contemplated products must contain the expression “Sale with sponsored discount due to Provisional Measure No. 1,175, of June 5, 2023”.

From then on, the automaker is entitled to a presumed credit of PIS and Cofins, to reduce other tax debts with the Union. The IPI tax will also not be levied on the amount of the discount.

In the first fifteen days, the discount for light vehicles will be restricted to individuals.

Each assembler will have the right to grant up to R$ 10 million in bonuses. The car discount program itself will use a total of R$ 500 million from the Budget for its operation. The measure ends with the full use of this limit or at the end of the four-month period – whichever occurs first.

Another BRL 1 billion will be allocated to a similar initiative for buses and trucks, of which BRL 700 million will be for cargo vehicles and BRL 300 million for public transport vehicles.

Read here the full text of MP 1,175.