Brazil’s Tax Reform: How VAT Could Impact International Air Travel Costs
The price of international air tickets for flights departing from Brazil could increase in the coming years with the approval of the current text of the Tax Reform. According to the proposal, the new single tax, VAT (Value Added Tax), will have a base rate of 26%, which will be fully charged to passengers purchasing international tickets from Brazil.
For round-trip tickets, the rate will be reduced by half, meaning a 13.5% tax on the ticket price. Currently, the taxes that VAT will replace (Cofins, ISS, and ICMS) are not applied to international air tickets due to an international convention to which Brazil is a signatory.
Industry sources informed the newspaper Folha de São Paulo that the application of VAT will negatively impact international air traffic in Brazil, potentially reducing the total number of international passengers in the country by 22% annually.
Meanwhile, the government has argued that the tax exemption on aviation kerosene (which is not taxed on international flights precisely because Brazil is a signatory to international agreements) and other benefits in the aviation sector’s supply chain already “overly favor” commercial aviation, according to reports from our partner media outlet in the country, AEROIN.
Adjustments can still be made to the text that was approved in the Chamber of Deputies, and each sector will have a specific tax rate, which will be defined after the text is sanctioned by the President of the Republic. Nevertheless, VAT will only begin to be charged starting in 2033, allowing for adaptations in the Brazilian tax system and providing predictability to society.
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