IPVA on planes and boats should yield R$10.4 billion – 03/23/2024 – Market

Reason for controversy in the 2022 pre-election campaign and clashes between then-candidate Ciro Gomes (PDT) and presenter Luciano Huck, charging IPVA on aircraft and vessels could add up to R$10.4 billion to states’ revenue. In São Paulo alone, the estimated revenue is R$3 billion.

The possibility of charging Motor Vehicle Property Tax on these items was approved at the end of 2023 in the tax reform. It could be regulated this year, paving the way for states to collect the tax in 2025.

Last year, IPVA as it stands today accounted for almost 10% of total state revenue (R$81 billion), according to data from Confaz (National Council for Financial Policy). The additional R$10.4 billion from the collection of tax on new items would, therefore, add around 12% to this revenue.

The collection estimates are from Sindifisco Nacional, which represents the tax auditors of the Federal Revenue Service. The calculation takes into account the current number of aircraft and vessels in the country (and their market prices) subject to taxation under the reform and a rate of 4% — charged by many states on goods and articles considered luxury.

Categories specifically exempted in the tax reform constitutional amendment (132/2023), such as commercial planes and fishing boats, are left out of the estimate.

Brazil has the second largest executive aviation fleet in the world, with 10,186 aircraft (including 1,976 helicopters), behind only the United States. They belong to individuals with high purchasing power and to companies, which do not have the same IPVA that taxes car and motorcycle owners.

The fleet of sports and leisure vessels is estimated at around 380.9 thousand units. Last year, at the São Paulo Boat Show, the largest nautical event in Latin America, launches were sold for R$22 million; and the general business estimate exceeded R$450 million — almost half of the R$1 billion that the sector generated in 2023.

In 2021, even before the 2022 electoral campaign, Ciro Gomes called for tax collection on aircraft and vessels and criticized presenter Luciano Huck (who was considering running for President) for not paying IPVA on jets purchased with state financing. In response, Huck said: “Good, Ciro, I agree with you. I would be the first to pay”.

In 2019, BNDES had released a list of 134 companies that took out a loan from the bank to purchase Embraer executive jets from 2009 to 2014. Among them was Huck, with R$17.7 million, and the then governor of São Paulo , João Doria, also a potential candidate at the time, with R$44 million.

In the past, states such as São Paulo, Rio de Janeiro, Amazonas, Pernambuco and Ceará tried to institute IPVA on aircraft and vessels. But the local laws were invalidated by the STF (Supreme Federal Court), on the grounds that the tax would, historically, have succeeded the Single Road Tax, which excluded planes and boats from the incidence.

“It is an injustice that motorcycle couriers pay for motorcycle ownership and that millionaires with jets and yachts that they use for leisure activities do not”, says Isac Falcão, president of Sindifisco Nacional.

“It is not unlikely that owners would want to avoid the tax by simulating the transfer of their aircraft to air taxi companies based in Brazil or abroad. Legislation must close the loopholes, and tax auditors, enforce the law to prevent abuse.”

With the tax reform amendment, states will now be able to charge the fee. Experts recommend that, to avoid legal questions, they send new projects to the Legislative Assemblies to define how the charge will be — instead of simply resuming what had been rejected by the STF.

The collection of the tax can only come into force from 2025, as it is necessary to respect the principle of annuality — and also the 90-day period after the approval of future laws. Therefore, it is essential for states to regulate tax reform as soon as possible, in 2024.