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Brazil is to give tax breaks to companies that invest in research and development (R&D), in an attempt to stimulate 'home-grown' innovation.

Under legislation passed this month, companies that devote part of their budget to R&D will be able to claim back tax paid on their R&D expenditure at the end of the year. They will also be reimbursed for tax paid on infrastructure and equipment used in research projects.

Furthermore, Brazilian companies that patent new products as a result of their research will receive a double bonus of twice the tax paid on R&D

Brazil, like many developing countries, has relatively low levels of innovation. Companies tend to buy technology from other countries, and research is mainly done by universities and is not transmitted to the commercial sector.

The approval of the new tax breaks follows controversy over a proposed law to boost innovation by relaxing employment rules covering scientific and technological institutions (see Innovation law stirs controversy in Brazil). Despite pressure from the ministry of science and technology to get the law approved by parliament this year, the vote has now been put off until 2003.

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