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Brazilian Federal Government sets a zero rate for WHT on cross-border payments of aircraft leases until the end of 2023


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​On 31 December 2021, the Presidency of Brazil published Provisional Measure No. 1,094 (MP 1,094/21), which amends Law 11,371/06 and reduces to zero the rate of withholding income tax (WHT) on payments made until 31 December 2023 arising from leases of aircraft and aircraft engines, entered into by air carriers engaged in scheduled and public air transport services of both passengers or cargo.

This initiative had been much awaited by the airline industry since the publication of Provisional Measure No. 907 on 26 November 2019, later passed into Law No. 14,002 of 22 May 2020, which revoked the benefit of zero rate of WHT levied for a long time on lease transactions related to the airline industry.

The Brazilian Federal Government's initiative comes at a time of instability in the Brazilian airline industry, which seeks to recover from the impacts caused by the Covid-19 pandemic while facing great devaluation of the Brazilian Real against foreign currencies.

Even though zeroing the WHT rate until 2023, MP 1,094/21 already provides for an increase in the applicate rate starting from 2023, which will occur as follows:

(i) 1% on payments made between 1 January and 31 December 2024;

(ii) 2% on payments made between 1 January and 31 December 2025; and

(iii) 3% on payments made between 1 January and 31 December 2026.

MP 1,094/21 came into force on the date it was published, and will become effective for 60 days as from such date, renewable for an additional period of 60 days. After its term of effectiveness, it will be passed into law by the Brazilian Congress and, if this does not occur, it will cease to produce effects. 

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