Brazilian government withholding tax on lease rental payments

On 26 November 2019, the Brazilian government published a provisional measure which increases the withholding tax rate as from 1 January 2020 on cross border lease rental payments made by Brazilian resident airline companies (for example, payments made to Irish resident aircraft or engine lessors).

The new rates (per the current draft of the provisional measure) will progressively increase starting in 2020 and will apply based on the date of contract execution as follows:

• 0% for contracts signed until 31 December 2019;
• 1.5% for contracts signed in 2020;
• 3% for contracts signed in 2021; and
• 4.5% for contracts signed as from 2022.

Previously a withholding tax rate of 0% on cross border lease rental payments made by Brazilian companies that are engaged in regular public air transport was due to apply through 31 December 2022 (per Normative Instruction 1,664). This was despite the fact that the Brazilian Federal Revenue Service had added Ireland to Brazil's “low tax jurisdiction” list, as defined in the Brazilian legislation, in September 2016.

The withholding tax rate of 0% should continue to apply to existing lease contracts signed on or before 31 December 2019. The legislation is subject to change before approval into law and so we will monitor the position closely.

To access an article on this change, please click here.


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