MP that reduces tax on foreign travel is approved – 02/28/2023 – Market

The Senate approved this Tuesday (28) the MP (provisional measure) that reduces the rate of income tax withheld at source for payments related to travel by Brazilians abroad.

The measure applies to payments made by Brazilians to individuals or companies located abroad to cover personal expenses during tourism and work trips, up to the limit of R$ 20,000 per month.

Since January of this year, the provisional measure has reduced the Income Tax rate on remittances abroad from 25% to 6%. The percentage will be maintained in 2024, but will gradually increase by one percentage point per year from 2025, reaching 9% in 2027.

The MP was issued in September last year by former President Jair Bolsonaro (PL) to improve the competitiveness of Brazilian tourism agencies after two years of the Covid-19 pandemic.

Despite having been sent to Congress by the Bolsonaro government, the proposal had support from the base of Luiz Inácio Lula da Silva (PT) for approval.

As the Panel showed, the government even tried to overthrow the MP due to the expected decrease in revenue. Sector representatives argued, however, that the exemption has already been adopted in past administrations, including the PT, and benefits small companies.

“The MP was edited by the previous government due to a demand from the sector, and the government of President Lula, Minister Haddad [Fazenda]understood that it was more than pertinent”, said the leader of the government in the Senate, Jaques Wagner (PT-BA).

The estimate is that the waiver of tax revenues will be R$ 1.07 billion in 2023; BRL 1.52 billion in 2024; and R$1.68 billion in 2025. The impact is already foreseen in this year’s budget revenue estimate.

The rapporteur for the text, Senator Daniella Ribeiro (PSD-PB), said that the measure will help around 35,000 national tourism agencies, which directly employ around 350,000 people.

“The impact is significant on the revenue of companies and, consequently, on the generation of work, on the collection of taxes, which is exponentially beneficial for the economic cycle”, he stated in his opinion.

The rapporteur also pointed out that companies are already counting on the maintenance of the reduced rate on services that have already been contracted, “since normally international trips are purchased in advance”.

The MP had already been approved by the Chamber of Deputies and would expire this Wednesday (1) if it did not pass through the Senate. As the senators did not make any changes to the text, the MP goes on to be enacted.