Rio to propose adoption of tax exemption for foreign tourists

The state of Rio de Janeiro intends to present, at the next meeting of the National Council for Finance Policy (Confaz), in November, a proposal to adopt a tax free (tax exemption) for purchases by foreign tourists.

In addition to the unanimous approval of the council’s 27 state finance secretaries, the policy will need to be voted on by the Legislative Assembly of the State of Rio de Janeiro (Alerj) to be implemented.

The topic was discussed this Tuesday afternoon (20) at the Commercial Association of Rio de Janeiro (ACRJ). The state secretary of Tourism, Sávio Neves, explained that exempting foreign tourists from the Tax on the Circulation of Goods and Services (ICMS) on the purchase of selected products would mean a tax waiver of around R$ 19 million.

On the other hand, the Tourism Department expects an increase of R$ 100 million in sales.

“Tax free already works all over the world, in some cities and developed countries, and we would place Brazil and Rio de Janeiro, in a special way, at an important level of incentive to trade in items that tourists always buy more” , says Sávio Neves, who believes that other states that receive foreign tourists will walk in the same direction.

Tax exemption for foreign tourists exists in about 60 countries, including neighbors such as Uruguay and Chile, as well as Peru and Colombia that have recently joined the policy. Proponents of the proposal argue that the possibility of not paying taxes when shopping is one of the criteria that make tourist destinations more attractive.

Neves predicts that, with the approval of the project at Confaz and Alerj, it will be possible to implement it in the first half of next year. Another necessary step is the choice, via bidding, of a private company to operate the tax free system, which will be computerized, integrating merchants and the state tax authorities to provide traceability to purchases.

The company Global Blue, a tax free operator in more than 40 countries, participated in the event and presented that some legal issues need to be discussed in the elaboration of the tax exemption policy, such as which products will be eligible, which tourists can benefit from the exemption and whether there will be a minimum amount for purchases, among other points.

Different models around the world also provide for different forms of exemption, such as already buying the product tax-free at the store, or being refunded the tax amount at the airport, before returning to your country of origin.

Advisor to the presidency of the Federation of Trade in Goods, Services and Tourism in the state (Fecomércio-RJ), Luiz Velloso said that the federation will be ready to help traders interested in implementing the system, if it is approved.

For this, the National Service for Commercial Training (Senac) will be mobilized. “It is important that Rio de Janeiro is the gateway to tax free in Brazil,” he said.

Velloso highlights that the state has recovered the flow of Brazilian tourists throughout this year, but has not yet managed to resume foreign travel in the same number as it received before the pandemic.

“Fecomércio understands that it is a mechanism that comes to help retail. We are coming out of a time of serious crisis, and it is good news,” he concluded.