Brazil's Inland Revenue Cracks Down on Tax Havens, With Drastic Effects on Air Companies

09/16/2016 - 11h21

Brazil's Inland Revenue continues to wage war against tax havens. Its decision to add four more destinations to the list of countries that offer favourable tax advantages, has been met with outcries from Brazilian companies and other governmental bodies.

Ireland, Austria, Curaçao and Saint Martin have all been denominated as tax havens by the Brazilian Revenue.

From now on, any national company with business in these countries will pay higher taxes on commercial and financial transactions with Brazil.

The decision will affect the air travel sector, which estimates an annual increase in costs of up to R$1 billion (US$ 300 million).

"Roughly 60% of our air fleet is rented by companies with a base in Ireland," said to Folha Eduardo Sanovicz, President of Abear, the association that represents the sector.

According to Sanovicz, the Revenue's decision will increase from 15% to 25% the rate of tax paid by air companies on the rental value of 300 of 519 crafts in their fleets.

The consumer giant JBS, which had planned to move its headquarters to Ireland, has changed its mind and will now move to London.

Mining company Vale, which has a subsidiary in Austria, will also be hit hard by the new ruling. It will be a bad year for Vale, what with the drop in oil prices and the loss of interest from China, its main buyer.

In adopting this measure, the Brazilian financial sector is falling in line with other countries that impose strict regulations on tax havens and are particularly sceptical of the tax rules in Ireland.

Translated by GILLIAN SOPHIE HARRIS

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