ABAG wants level playing field for private companies for VAT, with payment spread over an aircraft's useful life

Brazilian corporate operators are hoping for relief from a series of import taxes imposed on business aircraft as part of new budgetary measures to be introduced by the country's parliament this year.

Brazil imposes a federal value-added tax (VAT) of 10% for private aircraft operators, which compares with only 5% for air taxi operators and zero-rated imports for commercial airlines. Individual states levy a further tax, typically 5%.

The Brazilian General Aviation Association (ABAG) has been lobbying the government in Brasilia to level the playing field for private operators to the same rate as air taxi operators. It also wants to spread the payment over the useful life of the aircraft, which the Brazilian Tax Office stipulates to be 10 years.

ABAG executive vice-president Adalberto Febeliano says: "We're not trying to avoid paying the tax – everyone in Brazil is affected as it's a high-tax country – instead we want to amortise the tax burden over the useful economic life of an aircraft." Many aircraft are sold before they reach 10 years old, with the owner forced to pay VAT on the replacement aircraft without receiving credits for the original one, he says.

The association has already scored one success by getting business aviation exempted from a federal 9.65% flat sales tax imposed last year. Febeliano says lobbying efforts could see depreciation taken into account in VAT payments in new tax measures to be announced in the final quarter of this year. The association is also pushing for a reduction in VAT payable on aviation fuel, which currently runs at 25%.

Embraer president Maurico Botelho says: "Buying an aircraft manufactured in Brazil costs more for a Brazilian operator than one that is imported. It is crazy. Jobs and the circulation of wealth in Brazil don't count. Thank God the government is looking at this."

Source: Flight International