Congress, agriculture, taxation and 2024: what happened and what’s to come

Congress, agriculture, taxation and 2024: what happened and what’s to come

Scenario for 2025 is equally challenging

Eduardo Lourenço Gregório Júnior

The agricultural sector is the main pillar of the Brazilian economy, supporting not only the internal food supply, but also Brazil's position as an indispensable global food exporter. Not to mention the sector's responsibility within the scope of the energy transition, especially with the production of biofuels.

In 2024, the sector faced significant challenges, but through hard work, it achieved important victories in defending taxpayers and building a more sustainable future.

The main point, in fact, is the progress made in approving the regulation of the tax reform, the PLP 68/2024. According to a survey resulting from daily monitoring, the sector obtained, in the first vote in the Chamber of Deputies, no less than 23 advances, when compared with the initial text sent by the federal government. In the Senate, in turn, 19 more points were corrected.

Before detailing and explaining some of these advances, we must remember that tax reform is an agenda of the National Congress. Presented in 2019, it was always led by the presidents of the legislative houses, especially by the current president of the Chamber, deputy Arthur Lira. It is, unequivocally, a Brazilian agenda that will show its practical effects from 2027 onwards – the year in which CBS will definitively replace PIS and Cofins.

All advances were made based on the premise that the agricultural sector has its particularities and, at the end of the day, those who benefit from correct tax treatment are the Brazilian population.

An example of appropriate treatment is the concept of rural producer, allowing anyone who earns up to R$3.6 million/year to only be a contributor if they wish. If left out of the system, it will guarantee presumptive credit for the industry purchasing its rural production. This point, combined with the deferral in all purchases of agricultural inputs, brings a huge step forward in avoiding the accumulation of tax residue.

Taking advantage of the issue of tax residue, it is important to remember that, although it is customary to say that there is no taxation (deferral, exemption, base reduction, etc.), the fact is that the reversals of credits (in the production of inputs, for example) and the failure to fully take advantage of the non-cumulative nature (concept of input for PIS/Cofins purposes) bring the reality that there is taxation, whether in exports or in the sale of products internally, such as of the basic basket.

Another point already mentioned is the issue of inputs, which, in addition to having a 60% reduction in IBS and CBS taxation and, consequently, not being covered by the Selective Tax, also allow acquisition, by the rural producer, with deferral of taxation. That is, you will not pay the tax when purchasing the input, resulting in less need for cash flow, facilitating investment in the field.

At this point, the National Congress also provided for the fast track system for the inclusion of new inputs and products for the manufacture of pesticides, facilitating technological innovation and encouraging national industry.

On the population's side, the sector defended the right of Brazilians to have access to low-tax foods, in particular defending the inclusion of animal proteins in the basic food basket. Without going too much into the merits of the rates – which will only be known after the test period in 2026, in which we will have a rate of 1% to verify the functionality of the system and the collection capacity –, the low impact that the basic food basket has on the general rate is more than justifiable.

Including the Constitution, according to which food is a social right for everyone, art. 6th; of the worker, art. 7th; It is the obligation of the Union, states, Federal District and municipalities to organize food supply, art. 23, VIII; of the single health system to monitor food quality, art. 200, VI; It is up to the State, in fulfilling its education duty, to assist the student by providing food, art. 208, VII; duty of the family, society and the State to ensure that children, adolescents and young people have food, art. 227; among other points.

Also, from an economic perspective, immunity in exports, including the possibility of acquiring rural production with suspension of taxation on sales to exporting companies, even of industrialized products, and the non-cumulative nature of the effective return of credits are major advances that bring greater competitiveness to the Brazilian agricultural sector.

There are many other points, which, to be explained, would require not an article, but a daily column for a few months.

In any case, the advances and gains that the sector has obtained are not a reduction in losses, but actual gains. If the initial texts of PEC 45/2019 and PLP 68/2024 had prevailed, the agricultural sector would be in serious trouble, but with the actions of the entities and, in particular, the Agricultural Parliamentary Front (FPA), the reality is different.

Particularly, the work of the FPA must be praised, which led the defense of the sector, guaranteeing progress in this year 2024. However, the work and gains were not only in the scope of tax reform, but also in other topics that involve the federal government's efforts. This is because, under the justification of achieving fiscal targets, tireless attempts are made to increase revenue instead of cutting expenses.

At this point, two attempts by the government were rejected with the coordination of the FPA. Initially, in the Provisional Measure 1227, known as the “MP of the End of the World”, the intention was to limit cross-compensation. The National Congress returned the MP. More recently, in the package of new tax measures, PLP 210 intended to go further: in the event of a primary deficit, the Executive Branch could limit taxpayers' right to offset federal tax debts. The report approved by the Chamber further rejected this undertaking.

Other three points that the sector achieved in 2024 were: (i) enactment of Law 14,943, which exempted corn bran, essential for the feed production chain; (ii) the overturning of the partial veto on Complementary Law 204, allowing taxpayers to define the tax treatment of the transfer of goods, ensuring greater legal certainty; (iii) and the guarantee of payroll tax relief, bringing greater possibilities of employment for the Brazilian population.

In addition to the tax issue alone, the FPA also led the sector's leading role in approving energy transition projects: CBios, Combustível do Futuro, Paten and the expansion of the carbon market are examples. Initiatives that show Brazil's commitment to leading international environmental issues through the energy transition.

Moving from what has been done to what will be done, in 2025 the scenario is equally challenging. Tax reform will still be at the center of debates, with emphasis on the PLP 108/2024, which creates the Management Committee, possible vetoes to PLP 68 and other unnecessary legal and infra-legal acts.

The definition of CBS rates, state and municipal legislation and the National Regional Development Fund (FNDR) will also be crucial points. Furthermore, legal issues arising from the reform will also be a topic of debate, such as ADI 7755.

In income taxation, the focus will be on compliance with Pillar 2, which establishes a global minimum taxation, and the reform of Income Tax.

The year 2024 was crucial for consolidating the leading role of the agricultural sector, balancing tax demands with environmental and energy transition challenges.

Eduardo Lourenço Gregório Júnior
PDoctor and master in Constitutional Law from UniCEUB and Master of Laws (LLM) in Tax Law from IBMEC. Partner at Maneira Advogados

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