Tax: Brazil

Contributor: Nicole René Gomes e Cunha

1. Will the relevant law require any sales, value added or other taxes to be payable on a domestic sale/purchase or transfer of title/interest of an aircraft?

Domestic transfer of title (i.e., between Brazilian buyers and sellers) to aircraft in Brazil is subject to “ICMS” tax (similar to VAT) and income tax on capital gains.  

2. Will the relevant law require any sales, value added or other taxes to be payable on an intra EU sale/purchase or transfer of title/interest of an aircraft?

Not applicable.

3. Will the relevant law require any sales, value added or other taxes to be payable on a sale/purchase or transfer of title/interest of an aircraft in that jurisdiction if the purchaser is a foreign entity and will export the aircraft to another country?

If the seller is a Brazilian taxpayer, the sale may be subject to the ICMS and income taxes mentioned in section 1 above.  If neither the seller nor buyer is Brazilian then, since February 2004, Brazilian Law has provided that on the sale of assets “located in Brazil” Brazilian Capital Gains Tax (“BCGT“) is due.  To the best of our knowledge, however, the SRF (as defined in section 1) has not sought to impose BCGT on such sales of aircraft registered in Brazil since the inception of the law mentioned above.  We note, however, that there still exist uncertainties concerning whether the SRF intends to collect BCGT on the sales of aircraft between non-Brazilian parties and the methods the SRF would use to assess and collect BCGT on such sales.  We note further that if the SRF were to endeavour to impose BCGT on sale of the Aircraft each of the seller and purchaser would have valid legal arguments to challenge such applicability.  It is not possible to predict the outcome of such a challenge at this time.  

4. Will the relevant law require any export tax and/or customs duties to be payable on the export of an aircraft in the relevant jurisdiction?

There are no export taxes.  Note, however, the reply to Question 5, which discusses the possibility of import-related taxes being assessed at the time of export.  

5. Will the relevant law require any import (value added) tax and/or customs duties to be payable on the import of an aircraft in the relevant jurisdiction?

Possibly.  Importation of aircraft under purchase agreements are subject to ICMS (similar to VAT tax and described in section 1 above), Import Tax (“II”) and Federal Excise Tax (“IPI”) and COFINS.  For importation under aircraft lease agreements there are some tax benefits and reduction of tax rates.  The benefits and reductions of these taxes vary depending on the type of importer (e.g., regularly scheduled carriers enjoy certain benefits), the type of aircraft and the type of lease (e.g., operating or finance lease).  There is an additional tax applicable on all aircraft imports, called “COFINS”, which was not applicable to aircraft imports prior to 2013.  Based on a change in law that occurred in late 2013 the SRF began to assess the COFINS tax on aircraft imports beginning in the last quarter of 2014.  Airlines have been challenging the assessment of the COFINS tax on the importation of commercial aircraft under lease agreements.  To date most airlines have been able to avoid paying such COFINS tax, however, this has been based on interim judicial rulings and not final decisions on the merits of the applicability of the COFINS tax.  If and when applicable the COFINS tax would be 1% of the value of an aircraft at the time of importation. 

6. Will the relevant law require any stamp duties or fees and/or documentary taxes to be payable upon the execution of any aircraft transaction documents in the relevant jurisdiction?

There are no stamp duties.  Certain documents must be registered and there are applicable registration costs and formalities. 

7. Will the relevant law require any taxes or duties on registering the aircraft?

Taxes and duties are triggered by importation, purchase, and the remittance of rentals.  No particular tax or duty is triggered by registration of an aircraft.   

8. Are there any luxury taxes payable in your jurisdiction in relation to aircraft?


9. Will the relevant law require any income, withholding or other taxes to be payable in respect of payments made by an aircraft lessee to a lessor?

Lease rental payments made to Lessors incorporated in jurisdictions that are not considered “tax havens” under Brazilian law are exempt from withholding taxes.  There is a possibility that the Lessee would have to withhold Brazilian income tax at the rate of 15% on payments of interest (e.g., default interest). 

Lease rental payments made to Lessors incorporated in jurisdictions that are considered “tax havens” under Brazilian law are subject to Brazilian income tax withheld at source (i.e., withheld in Brazil), at the rate of 25% of the amount of the payment.  This tax is commonly referred to as “withholding tax”.   

“Tax havens” are defined as jurisdictions with annual corporate income tax rates under 20%.  The SRF publishes a list of countries that are treated as “tax havens” for tax purposes.  

In September 2016 the SRF added Ireland to its list of tax havens.  The result is that rent payment remitted to Irish lessors, commencing on October 1, 2016, are subject to the 25% withholding tax.  After Brazil’s airlines strenuously lobbied the Brazilian Government to remove Ireland from the list of tax havens, on October 13, 2016 the SRF issued a new regulation (IN1664) exempting commercial aircraft lease payments to lessors located in tax haven jurisdictions.  Thus, the SRF actually created a safe harbor for Brazilian airlines to lease aircraft from jurisdictions such as the Cayman Islands, the British Virgin Islands and Cyprus, all jurisdictions that have been on the list of “tax havens” for years.  It is doubtful, however, that the airlines will change their practices and begin to lease from those jurisdictions.  The exemption created by IN1664 is effective for leases dated through and including December 31, 2019 and for payments due through the end of calendar 2022.  There is a general expectation that this exemption will be extended prior to the end of 2019.  This exemption applies to commercial airlines only. 

10. What are the tax implications for operation and use of commercial aircraft?

Airlines are subject to complex tax obligations on ticket sales.  Due to the number of variable factors such as the domicile of the airline and the availability of tax incentives, it is not possible to accurately summarize all applicable tax implications applicable to commercial aircraft operations.    

11. What are the tax implications for operation and use of corporate and/or private aircraft?

This depends on many factors such as whether the operator is an air taxi company or a private operator.  Again, due to the number of variables that would affect tax treatment it is not possible to summarize the tax treatment of corporate and private jet operations.  

12. Will the relevant law require any taxes to be payable on aircraft loan repayments (income tax and interest)?


13. Does the relevant law have any environmental or carbon emission taxes or schemes?

There is no specific carbon emission tax in Brazil.  The Brazilian National Civil Aviation Agency (“ANAC”) has been controlling the issuance of carbon gases from Brazilian airlines in international flights since January 1, 2019.  Such measure is ruled by the Resolution 496 published by ANAC on November 27, 2018 as a consequence of the compliance with the environmental liabilities described in Appendix 16, volume IV, of the Chicago Convention as ratified by Brazil. 

14. Will the relevant law require any cargo, airport (departure) or passenger taxes?

Yes.  Domestic cargo transport is subject to “ISS”, which is a service tax over cargo transport due when the transport occurs inside of a specific city or between cities inside the same State in Brazil.  The ICMS (described above) is due on passenger and cargo transport between States in Brazil and in international transport.  There is a wide range of tax rates for ICMS over cargo transport domestic and internationally depending on the nature of the cargo. 

15. Will the relevant law require any aviation fuel taxes?

Yes.  The ICMS is also charged locally by each State in Brazil and it has incidence over aviation fuel.  Each State has independency to define the tax rate over aviation fuel.  Recently in 2019 São Paulo State reduced the ICMS tax rate from 25% to 12% and Rio de Janeiro has reduced it from 12% to 7%.  Brazil has 26 States and each with autonomy to impose the ICMS tax rate over aviation fuel.  There is also incidence of 5% of PIS/COFINS taxes over aviation fuel.  In accordance with recent publication from the Brazilian Association of Airline Companies (Abear) the Brazilian tax treatment over aviation fuel is one of the most expensive in the world in domestic flights around 40% more expensive than international standards.  The ICMS tax is not due on aviation fuel used for international flights.  

16. Are there any other taxes specific to aircraft (not already mentioned above) in the relevant jurisdiction?


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