Change comes after tax credit that prevented a larger drop in 2023 earnings
02/16/2024
Heineken’s taxation department must be dealing with mixed feelings regarding Brazil’s taxation system. After having been granted a tax credit in the country last year, which helped the company reduce a drop in its global profits, Heineken is preparing for the impact of changes recently approved in Brazilian tax legislation in 2024.
According to calculations unveiled on Wednesday (14) with the brewery’s financial report, the average effective rate paid by Heineken worldwide will increase from 26.8% in 2023 to 29% in 2024—and Brazil’s new legislation is cited by the company as the main cause. But the company has not revealed which changes will cause the biggest problems.
One change that could affect the beer industry in Brazil is the creation of a selective tax, which will replace the Industrialized Products Tax (IPI) with higher rates for products that could be harmful to health or the environment, such as cigarettes and alcoholic beverages, which already happens with the IPI. However, a supplementary law still has to approved by Congress to define the new tax rates. The new tax will not come into force in 2024.
The expected increase in the tax burden for Heineken will come shortly after the company was granted €661 million in tax credit in Brazil. According to the company, the amount helped to partially offset exceptional expense increases in 2023. Last year, Heineken posted €2.3 billion in net earnings, down from €2.7 billion in 2022.
The company did not specify in its financial statements what such tax credit refers to. According to the company, such credit is not related to the annulment of an infraction notice of nearly R$900 million in the Administrative Council of Tax Appeals (CARF) of 2023. The decision recognized the right to use premium to reduce Business Income Tax (IRPJ) and Social Contribution over Net Profit (CSLL) amounts. The fine refers to the acquisition of the Schincariol Group by Kirin Holdings (now Heineken, which inherited the dispute). Heineken acquired Brasil Kirin in 2017 for €664 million.
The original story in Portuguese was first published on Valor’s business news website Pipeline.
*Por André Ítalo Rocha — São Paulo
Source: Valor International