In October 2012, the Brazilian government approved by decree a new program to encourage vehicle technology innovation. Inovar-Auto fosters industry competitiveness by encouraging automakers to produce more efficient, safer, and technology-advanced vehicles while investing in Brazil.
Inovar-Auto provides these incentives in two ways. It first increases a tax on industrialized products (IPI) by 30% for all light-duty vehicles (LDVs) and light commercial vehicles. Second, it imposes a series of requirements for automakers to qualify for up to 30% discount in the IPI. In other words, IPI taxes will remain unchanged for those manufacturers that meet the requirements, thus incentivizing investments in vehicle efficiency, national production, R&D, and automotive technology. The program is limited to vehicles manufactured between 2013 and 2017, after which IPI rates return to pre-2013 levels unless modifications to the decree are made.
Download a fuller summary here.