Tax benefits on aircraft importation into Brazil are extended to 2024

The Brazilian Treasury Policy Council (Confaz) has renewed an agreement that extends ICMS (VAT tax) benefits for trading companies and air taxi operators on aircraft-related importation. These benefits are now set to continue through April 30, 2024. An order from the Ministry of Economy was published on October 8, 2021, making the renewal of the agreement official.

In effect since 1991, the agreement has already been extended on several occasions and plays an important role both in purchasing and importing aircraft in Brazil, whether for commercial or business transportation services.

Continued legal certainty

The aviation industry has welcomed the decision to extend VAT tax benefits – it had been eagerly awaiting Extension ensures reductions in VAT tax calculation base for aircraft, parts and accessories

clarification, as the agreement was scheduled to expire in December 2021. Terminating the agreement would have severely impacted the cost of importing aircraft into Brazil, especially given the rise of the US Dollar against the Brazilian Real.

By enabling a reduction in the VAT tax calculation base, the continuation of these benefits provides incentives for carrying out numerous transactions and other activities within Brazil’s aviation sector. The benefits are granted exclusively to domestic companies in Brazil’s aerospace industry, their domestic suppliers and companies within their sales network, as well as aircraft material importers and aircraft maintenance, modification and repair companies.

Related agreements extended

The following agreements were also extended:

• ICMS Agreement No. 65/2007, which authorizes VAT tax exemptions on transactions linked to manufacturing aircraft for exportation;
• ICMS Agreement No. 26/09, providing for a tax framework on transactions involving parts and pieces replaced under warranty, whether carried out by domestic aviation companies, aircraft maintenance and repair companies, or by establishing a sales network for aviation-related products.

Strategic justification

As these measures aim to promote technological development in Brazilian markets, extending them is justified – especially given the aviation sector’s capacity to play a prominent role in Brazil’s production chain. Moreover, as far as exports are concerned, the continuation of tax benefits even has the potential to strengthen Brazil’s high-level and international economic relations.

For further information, please contact Mattos Filho’s Aviation and Tax practice areas.

*The summary of this article is available in French, Japanese and Italian at this link.