The Administration of Brazilian president Jair Bolsonaro has enacted changes to the existing law that regulates the promotion of Brazilian culture via corporate initiatives.  Companies will need to adjust their approach to abide by the new structure of the “Rouanet” Law.

Background of the Law

The Rouanet Law, created by Law 8.313/1991, is considered the main tool to promote Brazilian Culture. It contributes to thousands of cultural projects that happen every year in all regions of the country.

Through the law, companies and individuals can sponsor various forms of cultural expression – shows, exhibitions, books, museums, galleries, etc. – and thus reduce their income tax burden.

How does it work?

The government forgoes receipt of the designated portion of the tax, via a tax waiver, so it may be directed to the accomplishment of cultural activities.

Companies whose real profit is taxed can invest in cultural projects approved by the Ministry of Culture in the Rouanet Law and deduct up to 4% of the income tax due.

The reimbursement of the sponsorship will come the following year, in the form of restitution or lowering the amount of the Income tax to pay.

Changes to the Law

On April 23, 2019, REGULATORY INSTRUCTION No. 2 brought changes to the regulation of this law.

These specifically include the following:

  • The maximum funding amount per enrolled project is R$1 million, instead of the previous R$60 million
  • The maximum eligible value of a company´s cultural sector is decreased to R$10 million, from the previous limit of R$60 million
  • All beneficiaries must carry out at least one Joint Action Plan with the municipality where the project will be carried out
  • The maximum funding amount of R$1 million does not apply to three categories of projects: restoration of protected heritage buildings; construction and maintenance of theaters and cinemas in small towns; and annual plans of non-profit entities
  • The new text establishes limits for audiovisual projects. Before, there was no specification.

Impact on Companies

The government states these changes will offer greater democratization in the access to resources, benefiting new artists.

Along those lines, the changes are intended to encourange the decentralization of the projects away from the Rio-São Paulo axis, where many past efforts have concentrated. Companies that present proposals in places with historically few cultural projects will be able to increase the number of them in their portfolio. In the North, Northeast, and Center-West, companies can increase by 100%. In the South Region and in the states of Minas Gerais and Espíritu Santo, by 50%.

Understanding the regulatory changes and implementing them into corplrate planning efforts presentes challenges and opportunities to companies.  Yet one thing is clear: the Brazilian government is aiming to shake up the practices of the past. Companies that are nimble and informed will be positioned to adapt most successfully.