The INOVAR-Auto Incentive Programme was created in October 2012 to support vehicle technology innovation, enhance competition in the automative sector, manufacture more efficient and safer vehicles and trigger investment in the manufacturing supply chain. It set specific targets for minimum investment in research and development, increase in the expenditure in engineering, basic industrial technology and capacity building of suppliers, production of more efficient vehicles and increase in the safety of the vehicles produced.
The Programme set a 30% increase on the Tax of Industrial Products (Imposto sobre Produtos Industrializados - IPI) for all light duty vehicles and light commercial vehicles. To be exempt of the 30% IPI, the automakers needed to meet a series of requirements related to the targets mentioned above.
Under the programme car manufacturers needed to improve their corporate average vehicle efficiency for new light duty vehicles by approximately 12% from 2012 levels by October 2017. Car manufacturers also had to comply with Brazil's Vehicle Labelling Programme (PBEV) and with a minimum share of vehicle sales.
This exemption applied only to vehicles manufactured between 2013 and 2017. Starting from 2017, vehicles that consume less than 15.46% will have the right to a reduction of 1% in the IPI. Vehicles that consume less than 18.84% will have the right to a reduction of 2% in the IPI.
Beneficiaries of the programme included companies that manufacture vehicles in the country, companies that sell vehicles in the country and companies that have an investment project to manufacture vehicles in the country.
Article 40 of law 12.715 of September 17, 2012 established the Inovar Auto Incentive Programme. In accordance with Article 40.1, the programme applied until December 31, 2017, after which all existing qualifications are considered to be cancelled and cease their effect, except for the implementation of commitments.