To enhance the competitiveness of Brazilian travel agencies on international operations where they serve as intermediaries, the Federal Government has enacted Provisory Measure (MP) 1.138/2022 to reduce the Withholding Income Tax (IRRF) on such operations for a total five-year period.
At present, the IRRF rate on remittances made from Brazil to overseas firms intended to cover the expenditures of Brazilians on international trips is 25%. Considering that the tourism industry was one of the ones most affected by the COVID-19 pandemic, the IRRF rate will be reduced to 6%, with progressive increases of 1% every year and ceasing in 2027 at a 9% rate.
Considering that this Provisory Measure was published on September 22, 2022, its 60-day effective period was to have terminated on November 20, 2022. Even so, since it has not yet been debated by the nation’s Congress, its effective period has been tacitly extended for an equal period, hence closing on March 3, 2023 (final deadline considering the annual Congressional recess).
Accordingly, it is necessary for travel agencies to pay attention in relation to the deadline for this MP’s effective period. This is because if it does not become converted into a law, travel agencies operating here will still be subject to the 25% IRRF rate on remittances made overseas to cover the expenditures of Brazilians on international trips.