Brazil Publishes Federal Decree Regulating Recycling Incentive Law

On July 11, 2024, the Brazilian federal government published Federal Decree No. 12,106/2024, regulating the tax incentive for the recycling productive chain established by Federal Law No. 14,260/2021, which aims to promote the use of raw, recyclable and recycled materials in production processes. According to the decree, individuals and legal entities taxed based on actual profit will be able to deduct part of their income tax due to direct support for projects previously approved by the Ministry of Environment and Climate Change.

As provided for in the existing law, eligible projects for receiving incentives include: (i) training, education, and technical assistance, including the promotion of national and international exchanges for educational/academic use, business, community associations, and social organizations explicitly focused on promoting, developing, implementing, or fostering recycling or reuse activities; (ii) incubation of micro-enterprises, small businesses, cooperatives, and solidarity social enterprises engaged in recycling activities; (iii) research and studies to support actions involving shared responsibility for product lifecycles; (iv) implementation and adaptation of physical infrastructure for micro-enterprises, small businesses, industries, cooperatives and associations of collectors of reusable and recyclable materials; (v) acquisition of equipment and vehicles for the selective collection, reuse, processing, treatment, and recycling of materials by industries, micro-enterprises, small businesses, cooperatives and associations of collectors of reusable and recyclable materials; (vi) the organization of marketing networks and production chains, and support for these networks, integrated by micro-enterprises, small businesses, cooperatives and associations of collectors of reusable and recyclable materials; (vii) strengthening the participation of collectors of reusable and recyclable materials in recycling chains; and (viii) the development of new technologies to add value to the collection of reusable and recyclable materials.

The promulgation of the decree, in conjunction with the existing law — which, among other provisions, established the Support Fund for Recycling Actions (Favorecicle) and Investment Funds for Recycling Projects (ProRecicle) — is part of the revitalization of the federal Cataforte program. This program aims to boost employment and income within recycling cooperatives and associations. Its goal is to fortify and organize these entities by encouraging cooperation with public banks, foundations, ministries and state-owned enterprises, thereby enhancing their involvement in selective collection and reverse logistics to foster positive socioeconomic impacts.

The decree limits these tax deductions of 6% of income tax for individuals in the Annual Adjustment Declaration of Personal Income Tax, and 1% of income tax for legal entities in each quarterly or annual assessment period. Accepted proposals eligible for fundraising will be made available on the Ministry of Environment and Climate Change’s website, in addition to being published in the Official Gazette.