Brasilia - In a race against time to implement at least three tax relief measures in the midst of an election year to alleviate cost pressures on airlines, the government is already considering issuing a provisional measure to eliminate income tax on aircraft leasing again within four years, the Minister of Ports and Airports, Tomé Franca, told NeoFeed .
"Our proposal foresees freezing the current 3% tax rate until the end of 2027. From then on, the rate will gradually decrease: 2% in 2028; 1% in 2029; 0% from 2030 onwards. But the issue is still under analysis," said Franca.
Discussions with the Finance Ministry are intense and are facing the economic team's traditional resistance to relinquishing revenue. Maintaining tax benefits involves tax waivers, which are always obstacles in negotiations of this type.
The Executive Branch has until December 31st to reduce income tax on aircraft leasing; to classify all airports as regional routes in order to achieve a 40% reduction in the tax burden foreseen in the tax reform; and to attempt to lower the IOF (Tax on Financial Transactions) on remittances paid abroad by airlines.
The deadline is tied to the decree on leasing benefits, which expires on the last day of the year – the tax reform will come into effect in Brazil from January 2027. As for the IOF (Tax on Financial Operations), the government also wants to reduce the current rate, but there is no defined deadline.
After emerging from bankruptcy protections in recent years, airlines are facing a perfect storm in 2026, with soaring aviation fuel prices due to the war in Iran and the end of tax incentives that expire this year.
"We can do it through a provisional measure and then convert it into law. I hope and am working towards it happening this year: a provisional measure to reduce income tax on airline leasing," the minister stated.
Airlines paid 15% income tax on aircraft leases to the owners of the planes (lessors), all located outside the country - mainly in Dublin, London and New York.
But since 2023, a decree from the previous government has been in effect, eliminating this tax, with rates increasing by 1 percentage point per year until reaching the current 3%. This benefit, however, ends this year.
Franca says he has been having frequent conversations with the Minister of Finance, Dario Durigan, which began when they were executive secretaries of their respective ministries. And reducing the taxes paid by the sector is on the agenda, since the tax burden on Brazilian airlines is higher than in other aviation markets around the world, he said.
"These are things that are always on the table, there's also the technical discussion about the IOF (Tax on Financial Operations), but all of this requires maturity with the Treasury. It's not a simple task for us to move forward on this agenda," he says.
"But these are issues that we are always discussing with the government's economic team, because we understand that air transport is essential in Brazil," the minister added, referring to the IOF tax paid by airlines on remittances made abroad.
Regarding the income tax levied on aircraft rentals, the minister reinforces the understanding that there is a misinterpretation in considering the leasing of these aircraft as income.
“The airline is sending the money abroad because the owners of the aircraft are not based in Brazil. And I need to make the remittance to be able to pay the lease payment: this is not income. And we need to correct this,” Franca explained.
Another sensitive issue is the IOF tax levied on remittances paid by airlines abroad, which the minister referred to. These remittances are made to pay foreign suppliers and service providers. The sector used to pay 0.38% IOF, but a government provisional measure that changed the tax collection last year increased the tax to 3.5%.
According to Ronei Glazmann, CEO of MoveInfra, an organization that brings together some of the largest Brazilian infrastructure companies, airlines are facing cost pressures on several fronts, and the situation is "very worrying."
Regarding the IOF (Tax on Financial Operations), the executive sees no hope that it will return to the previous rate level, but acknowledges the government's effort to ease taxation on the aviation sector.
“Companies send a lot of money abroad. And besides leasing, they have to pay for insurance, crew. So it's one blow after another. IOF [tax on financial transactions] has increased, income tax on leasing will increase, and there are also IBS [new taxes] from the tax reform,” Glazmann told NeoFeed .
“This worries the sector as a whole. Even the airports, because if the airlines don't do well, they won't either. So, if there isn't a special focus from the government on aviation, as there is everywhere else in the world, the sector won't prosper.”
Amid the conflict in the Middle East, the government has twice eliminated PIS/Cofins taxes on aviation kerosene (QAV) —the minister says it may extend this again if necessary—; provided credit, with public funds, for working capital, aircraft renewal, and parts for airlines; and postponed the payment of navigation fees paid by companies to the Brazilian Air Force.
"What was the result of these three measures? We didn't see an increase in the average airfare in Brazil, something that had to happen in other countries because, naturally, if you increase costs, you need to pass those costs on to the fares," the minister reiterated. "That's what the government is responsible for, and it's no small feat."
Reform is coming.
Another discussion that the Ministry of Ports is having with the economic team concerns the effects of the upcoming tax reform on the aviation sector. The new law that altered the Brazilian tax system will come into effect next year and, in the case of aviation, provides for a 40% reduction in the tax burden for regional flights.
Therefore, the relevant department has been discussing with the Federal Revenue Service a decree to classify all Brazilian airports as "regional." This is because it is still necessary to define the criteria for classifying a flight as regional and thus eligible for the tax benefit.
“Air transport in Brazil is not a luxury. Air transport is a necessity for tourism, for business, for the development of localities. For this, we need to reduce costs, and one way to reduce costs is through the efficiency of airlines. This is the company's role, but the State can also contribute,” Minister Franca points out.
Glanzmann, from MoveInfra, considers the measure fundamental, but admits difficulties in implementation due to its complexity, which requires consensus from various government bodies (Finance Ministry, Attorney General's Office of the National Treasury (PGFN), Attorney General's Office of the Union (AGU), Civil House). In addition, the Confaz, a council formed by state finance secretaries, must give its opinion on the matter.
“Their thesis is a network system. At some point, on an air route, everything becomes regional. The idea is good, the movement is favorable, but it's difficult to implement. Obviously, we're hoping it happens, otherwise the impact will be too great,” says the executive.
Matheus Piconez, a tax lawyer and partner at the law firm Baruel Barreto Advogados, also points out that the alternative of considering all regional airports to obtain the 40% reduction from the tax reform may also run into obstacles with state governments.
He points out that this tax reduction will not be given to companies or airports, but rather to flights whose origin or destination is in the Legal Amazon region or in regional capitals, sub-regional centers, or local centers, according to IBGE classification. Therefore, it is the airline ticket that would be exempt, not the airport.
“Classifying all airports as regional would universalize the 40% through sub-legal means, without changing the law. Therein lies the problem: regulations that treat metropolitan airports as regional tend to exceed the legal definition, risking challenges from states and municipalities, which lose IBS (Brazilian VAT) revenue and participate in the decision-making process through the [tax] Management Committee,” says Piconez.
Furthermore, the lawyer also explains that the tax reform could lead to an increase in airfare prices. Starting in January of next year, the CBS (one of the new unified taxes created by the reform) will replace the PIS and Cofins taxes, and between 2029 and 2033 the IBS (another unified tax) will replace ICMS and ISS.
“The domestic ticket price will increase from a cumulative 3.65% (PIS/Cofins) to a standard combined rate estimated at around 26.5% to 28%. Therefore, there should be a 23% increase in the domestic market with a drop in demand,” he points out.
