A wave of digital regulations are shaping a new era of ICT in Brazil. Are tech and telecommunication companies up to the challenge?
ICT R&D Tax Incentives
At the end of 2019, President Bolsonaro sanctioned the new tax and incentives regime for the ICT sector, known as the Informatic Law. The regime is aligned with the requirements of the World Trade Organization (WTO), which had been putting pressure on Brazil to make particular changes, after complaints from Japan and the EU that numerous Brazilian tax programmes were not in line with WTO rules as they favoured domestic products.
This new piece of legislation provides for tax incentives to manufacturers of ICT goods that invest in research, development and innovation (RD&I) in Brazil, maintaining higher tax reductions to the Centre-West, North and Northeast regions of the country. In these regions, financial credit grants can be up to 5.8% higher compared to other regions. In order to receive the incentives, the regulation maintains a minimum nationalisation requirement for production but reduces the need for nationalization if there is a greater investment in R&D. At least 60% of the production process is required to take place in Brazil to ensure eligibility.
Brazilian Privacy Law
By August 2020 companies in Brazil – or anyone processing data generated in the country – will have to comply with the new General Data Protection Law (LGDP in Portuguese). As with the EU’s GDPR, the LGPD will have extraterritorial application; any foreign company offering services to the Brazilian market and collecting or processing personal data of subjects located in the country will need to comply with the new law.
The LGPD provides a list of principles which companies must adhere to when processing personal data, such as limitation, necessity, transparency, security and non-discrimination. The law also contains provisions that permit the international transfer of personal data with the express consent of the user, which must be separated from other requisitions of consent.
5G Multibillion Auction
Due to the geopolitical issues concerning 5G and cybersecurity, Brazil’s 5G spectrum auction has been postponed to the end of the year. Brazil has 230 million mobile users, accounting for 32% of the region’s total mobile subscriptions. With this in mind, many companies are already waiting in the trenches and are preparing available resources to outbid one another.
Depending on the final decision by ANATEL, Brazil’s telecommunications regulator, regarding which bands will be included in the auction, this round of 5G bids will generate more money than any other that has taken place globally so far – up to USD 6 billion. More significant, are the billions of dollars’ worth of investments which will follow the auction and the future digitalisation of the 5th largest territory and 9th biggest GDP in the world.
What to Expect In 2020?
The current regulatory environment is fast-paced, and companies will need to be reactive to minimize risk. We estimate that 2020 will be a year where companies will be impacted by the volume and scope of regulatory action: from privacy, taxes and trade to telecom infrastructure issues, the Brazilian ICT market will be – as ever- an attractive but challenging one.
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