Brazilian tourism gains with an income tax rate of 6%

Brazilian tourism gains with an income tax rate of 6%

by Magda Nassar, Braztoa’s President

On July 21, 2016 Brazilian tourism entities celebrated the fact that the rate of 6% for income tax deducted at source (IRRF) on remittances abroad relating to spending on tourism, which had been finally sanctioned by the President, became official. The law, which is valid until December 31, 2019, substitutes the previous Law 12,249/2010 (Article 60). 

Negotiations lasted almost two years during which time the presidents of ABAV Nacional, Edmar Bull, and CLIA Abremar Brasil, Marco Ferraz, were by my side. For the time being the new legislation meets the desires of the sector as it searches for balanced market conditions. 

The joint work fully satisfied one stage in the process. Today the reduction in tax is a reality thanks to the serious and committed work our entities have done. This step will be followed by others: exemption, double taxation and regulations, in short an infinite number of sector demands that are just as important as this one. We continue with our struggle for the sector to be preserved and recognised as being a major generator of business. 

The decree by interim president, Michel Temer, is of utmost importance, since the reduction in tax means that the market once again becomes competitive and provides advantages that no other channel offers.  

Finally, I highlight some other important information on the topic:

  • The general rule now is for a rate of IRRF (income tax deducted at source) on tourism remittances of 6% for amounts sent to private individuals or legal entities up to a limit of R$20,000 a month. Over this limit the rate is 25%.
  • In the case of travel agencies there is no limit for applying the rate of 6%, with the exception of tax havens.
  • For tax havens the rate is 25%. But if the remittance is made by a travel agency the rate will be 6% with a limit of R$10,000 per passenger per month.
  • For amounts remitted to a beneficiary in a tax haven, the travel agency must also show the actual operational existence of such a beneficiary.
  • The travel agency sector was one of those that suffered most with the increase in tax at the beginning of this year, since the law affects resident Brazilians who need to pay people or companies abroad, which in the case of tour operators means their suppliers and partners spread around the world.
  • Only companies registered with Ministry of Tourism’s Cadastur have access to the reduced tax. Payment must be made by institutions based in Brazil.
  • Remittances for educational, scientific or cultural purposes will remain tax exempt, as will cover for medical-hospital expenses where the treatment is carried out abroad.

About Magda Nassar: As the first woman to preside Braztoa since its foundation in 1989, she became Chair of the Board in May 2015, from which position she has headed up relevant institutional and commercial projects for Brazilian tourism. She is also currently the Marketing VP for Agaxtur.

The opinions expressed in this text are the author’s opinion and do not necessarily reflect the position of WTM Latin América.

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