Tax exemption on payments for environmental services
- Piva Advogados
- May 20, 2024
- 3 min read
Find out about the tax benefits for those who take care of the environment.
Law 14.119/2021, which establishes the National Policy for Payments for Environmental Services (PNPSA), guarantees tax exemption for amounts received as payments for environmental services (PSA).
"PSA" is a financial mechanism to remunerate rural producers or owners of productive land, family farmers and settlers (a plot given by INCRA to a family of farmers or rural workers who cannot afford to buy a rural property), as well as traditional communities and indigenous peoples, for the environmental services provided on their properties that generate benefits for society as a whole.
The so-called "provider" of environmental services is the individual or legal entity, under public or private law, or family or community group that, having met the eligibility criteria, maintains, recovers or improves the environmental conditions of the ecosystems, will receive the payment - which can be made either by the government, a civil society organization (CSO) or a private agents, individual or legal entity, nationally or internationally.
The Federal Law provides that the payment can be made through different modalities, including direct payment - monetary or non-monetary - the provision of social improvements to rural and urban communities, and the Rural Environmental Quota and commercialization of green bonds, which opens up space for the monetization of preserved areas and stimulates the voluntary carbon market.
Types of Environmental Services according to Federal Law No. 14.119 13/01/2021:
Provisioning Services | Those that provide environmental goods or products used by humans for consumption or commercialization, such as water, food, wood, firas and extracts, among others; |
Support Services | Those that maintain the continuity of life on Earth, such as the cycling of nutrients, the decomposition of waste, the production, maintenance or renewal of soil fertility, pollination, seed dispersal, the control of populations of potential pests and potential vectors of human diseases, protection against ultraviolet solar radiation and the maintenance of biodiversity and genetic heritage; |
Regulatory Services | Those that contribute to maintaining the stability of ecosystem processes, such as carbon sequestration, air purification, moderating extreme climatic events, maintaining the balance of the hydrological cycle, minimizing floods and droughts and controlling critical erosion processes and landslides; |
Cultural Services | Those that constitute non-material benefits provided by ecosystems, through recreation, tourism, cultural identity, spiritual experiences, aesthetic and intellectual development, among others. |
In the same vein, Law Nº. 12,651 of May 25, 2012 (Article 41 of the Forest Code) already recognizes environmental services provided in Legal Reserve areas and Permanent Preservation Areas (APP) and provides incentives for their maintenance and/or recovery.
The government also set up, together with the Brazilian Institute of Geography and Statistics (IBGE), the registration of native vegetation conservation in the National Classification of Economic Activities (CNAE), making it possible to issue invoices for native forest conservation activities, boosting payment for environmental services in Brazil.
These actions aim to generate alternative income and employment for those who effectively protect the forest, stimulating a business environment favorable to entrepreneurship, so that a user pays those who protect the native forest in an effective and lasting way (provider-recipient).
Which taxes are exempt on the (monetary) payment received for Environmental Services:
Among the benefits guaranteed by the Law for those who provide this type of service, in addition to the payment received by the user-payer, the amounts received will not be considered in the calculation basis of various taxes, including the Tax on Income and Proceeds of Any Nature (IR), the Social Contribution on Net Profits (CSLL), the Contribution to the Social Integration and Public Servant Equity Formation Programs (PIS/Pasep) and the Contribution to Social Security Financing (COFINS).
The exemption only applies to payment contracts for environmental services between private individuals or by the government, provided they are registered in the National Register of Payments for Environmental Services (CNPSA). The taxpayer, however, will be subject to inspection.
Incentives for Environmental Preservation:
Law 14.119, of 2021, establishes guidelines and actions for the PNPSA, the aim of which is to encourage the maintenance, recovery and improvement of vegetation cover in preservation areas. Among its guidelines is the use of payment for environmental services as a tool to promote the social, environmental, economic and cultural development of rural and urban populations, including traditional communities, indigenous peoples and family farmers.
This policy seeks not only to encourage environmental preservation, but also to improve the quality of life of the people who work directly to conserve ecosystems. With the tax exemption, it is hoped that more landowners and communities will engage in sustainable practices, receiving due financial recognition for their contributions to the environment.
Sources:
Portal de Educação Ambiental - Governo do Estado de São Paulo - https://semil.sp.gov.br/educacaoambiental/prateleira-ambiental/pagamento-por-servicos-ambientais-psa/
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