Brazil aviation sector seeks tax reductions to offset reform impacts

The aviation sector in Brazil is negotiating with the federal government to mitigate the impact of new tax reforms. Commercial airlines are seeking a reduction of up to 40% in taxes on fuels and operational inputs to maintain the viability of regional routes and prevent significant increases in passenger ticket prices.

Regarding international travel, current exemptions may be replaced by a tax rate estimated at half of the total 26% rate. For the domestic market, taxes could rise from approximately 9% to the full rate. The International Air Transport Association (IATA) warns that if the reform proceeds as currently planned, international ticket prices could rise by 13.3%, potentially leading to a 17.8% drop in demand, or roughly 5 million fewer passengers annually.

The National Civil Aviation Secretariat (SAC) has submitted recommendations to the Ministry of Finance, proposing a special regime or a zero-rate tax based on international reciprocity, noting that most countries do not tax international air transport. Negotiations continue as companies face narrow profit margins and high volatility in fuel costs and currency exchange rates.