Brazilians to be Taxed 25 Percent on Travel Services Abroad

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – A deteriorating economic scenario and the steep depreciation of the Brazilian real in relation to the U.S. dollar discouraged Brazilians from traveling and spending abroad last year, according to the latest data from Brazil’s Central Bank. Now adding to the current trend, Brazil created a new tax over tourism services paid abroad, which will likely reduce spending even further in 2016.

The institution released a report on Tuesday that shows that Brazilians spent 32.1 percent less overseas in 2015, for a total of US$17.357 billion, the lowest volume since 2010. And according to analysts, the scenario is about to get worse.

According to analysts this sector is likely to suffer even further this year with the decision by the government to apply a 25 percent tax over tourism services paid abroad. In practice this means that travel agents booking hotels and excursions overseas will have to charge their clients an additional 25 percent due to the levy.

“What was already bad will now get even worse,” says Eliana Ferrari, travel agent at Goldtur Viagens in São Paulo. “Clients, who were already complaining about the high costs due to the foreign exchange rate, now will just think twice about traveling abroad.”

According to Ferrari several travel agencies have suspended selling low margin products, such as Disney Park tickets, since the beginning of the year. “The margin they made was so low to begin with, with this new levy they make no money at all,” she says. Ferrari also noted that ten large travel agencies closed last year, due to financial troubles and in the first month of 2016, three have suspended operations.

The government’s decision will affect Brazilians or residents of Brazil purchasing hotel accommodations, car rentals, tourism packages abroad. Airline and cruise tickets are not likely to be affected since most airlines and cruise ship companies have offices in Brazil and the money does not have to be wired abroad. Also Brazilians sending money abroad to maintain students studying overseas will not be charged the 25 percent tax.