Amendment puts Embraer’s domestic product on an equal footing to the imported product — Foto: Divulgação

The Chamber of Deputies approved this week a change in legislation to reduce red tape and costs faced by plane maker Embraer to benefit from a tax incentive for “fictitious” export of aircraft. The measure was approved by the government and is unlikely to cause fiscal impact, lawmakers say.

The amendment puts Embraer’s domestic product on an equal footing to the imported product. “Today, Brazilian airlines receive imported aircraft more quickly and efficiently than aircraft produced in Brazil. This asymmetry in the international logistics rules was solved with the amendment, making Brazilian aviation more efficient,” the company said.

The change was presented as an amendment by the government leader in the Chamber, Ricardo Barros (Progressive Party, PP, of Paraná), to the provisional measure to simplify airline sector rules – and which was used by the deputies to prohibit charging for checking in one piece of luggage.

The provisional measure’s rapporteur, General Peternelli (União of São Paulo), accepted the amendment in plenary and the blueprint was approved. “The project only made it easier one of Embraer’s procedures, which was to make a whole process of sending it to the subsidiary abroad and sending it back here to Embraer. This will no longer be necessary,” he said.

The legislation allows a tax reduction when the aircraft is exported, but does not provide the same benefit if the sale occurs within the Brazilian territory. Therefore, Embraer used to send the aircraft to one of its subsidiaries abroad and then “reimport” it. With the amendment, the export of aircraft without leaving the Brazilian territory will be authorized if the buyer is a company based abroad, but the vehicle is delivered to a regular air transport service provider in Brazil. This is also expected to facilitate the leasing of aircraft.

According to industry sources, however, the change will not bring benefits to the large commercial aviation companies in the country, such as Latam, Azul and Gol. The main beneficiary of the change in the law will be Embraer, Brazil’s largest manufacturer. The benefit still needs to be voted by the Senate until May 16 and signed into law by President Jair Bolsonaro (Liberal Party, PL) to be valid.

According to Mr. Peternelli, this is not expected to be a problem because the government has given its approval to the change in legislation. There will be no impact on the public accounts, since Embraer already executed this whole operation currently. In addition, the mechanism can only be used by companies with regular airlines. “If a soccer player or a businessman buys a Legacy, he will not be exempt from this tax,” he said.

Mr. Barros pointed out that aircraft were not contemplated in the legislation that allows presumed export (without the need to leave the national territory). Therefore, they needed to leave the national territory to a neighboring country and perform all the migratory and customs procedures, and then be imported back to Brazil by the buyer.

“This procedure, when coupled with the other relevant regulatory processes, takes around seven days, generating additional costs to airlines, in addition to payment of aircraft lease during the mentioned period,” said Mr. Barros. “Because of this situation, the Brazilian industry loses competitiveness against large international manufacturers,” he justified, while asking for support to approve the amendment.

Source: Valor International

https://valorinternational.globo.com