Tax | Tax Benefits for Investments in Decarbonization Credits in Brazil

The decarbonization credits, known as “CBIO”, are a trend between sustainable investments or green bonds in Brazil. And there are tax benefits for producers and investors. 

In short, CBIO is a credit that is equivalent to 1 ton of CO2 avoided, issued by certified biofuels producers and importers according to their purchase and sale invoices. Therefore, biofuels producers and importers can produce income issuing CBIO and forwarding it to B3 – Brazil Stock Exchange, through a bank or other financial institution (an underwriter). 

There are tax benefits for both producers and investors: the income resulting from the CBIO operations will be subject to a 15% Withholding Income Tax. Therefore, the income/revenue will not be taxed under Corporate Income Tax (known as “IRPJ”) and Social Contribution Tax (known as “CSLL”), that together represent an effective tax rate on corporate profits of 34%. 

Besides, for companies taxed under the actual income calculation basis, it is allowed to deduct expenses with administrative or financial costs involved in the issuance, register and trading of the CBIO, including the ones related to the underwriter. Nevertheless, possible losses in the operations involving CBIO are not allowed as deductible expenses. 

Fossil fuel distributors, which are potential buyers, do not have these tax benefits.  However, all the other investors that can have access to the bonds can be benefited by the tax incentives above.


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