BRAZIL Trends and Developments Contributed by: Marcelo Mello and Bruna Toniolo, Nantes Mello Advogados
infrastructure planning for this emerging urban air mobility technology. Tax and regulatory hurdles Cross-border aircraft financing into Brazil faces sev - eral tax and regulatory complexities that require care - ful structuring. Over recent years, withholding tax on operating leases from Brazil has swung dramatically – from as low as 0% to as high as 25% for payments to entities in low-tax jurisdictions like Ireland. The situation was further complicated in 2021 with the reset of withholding tax to 0% in 2022–2023, then 1% in 2024, 2% in 2025, and 3% in 2026 (Brazil, MP No. 1.094/2021) – a phased schedule that demands constant attention. Meanwhile, commercial aircraft imports are exempt from federal taxes such as Import Duty (II), IPI, and PIS/COFINS-Import (Brazil, Lei No. 12.249/2010), however, unless otherwise exempted, a 4% state-level ICMS tax still generally applies. Legal Risks and Market Challenges Judicial frameworks and consumer claims Brazil’s strong consumer protection laws enable courts to award substantial damages for passenger complaints, often exceeding standard compensation models under international aviation norms. As of mid- 2025, Brazil’s aviation sector continues to grapple with a significant volume of consumer litigation, leading to substantial financial implications for airlines. The National Justice Council (CNJ) reported a 72% increase in consumer rights-related lawsuits since 2020, with approximately 7.2 million such cases pend - ing nationwide (ConJur). This surge has been attributed to limited alternative dispute resolution mechanisms and a judicial environment that favours consumers. In the airline industry, this judicial environment has translated into annual legal expenditures exceeding USD200 million. These costs stem from frequent pas - senger claims related to flight delays, cancellations, baggage issues, and overbooking, often resulting in compensation awards. The financial strain from ongoing litigation has led to higher ticket prices and added operational complexity, which may discourage prospective entrants into the Brazilian market. To manage the surge in legal dis - putes, airlines are turning more frequently to alterna -
tive dispute resolution mechanisms, including media - tion and arbitration. Additionally, there is a growing emphasis on enhanc - ing customer service channels to address and resolve passenger complaints more efficiently, aiming to reduce the volume of legal claims and associated costs. This ongoing legal landscape underscores the importance for stakeholders in the Brazilian aviation sector to remain vigilant and proactive in managing legal risks and fostering improved consumer relations. Supply chain and OEM constraints Global delays in aircraft deliveries from major OEMs continue to affect Brazilian carriers, with ripple effects across their fleet planning and financing strategies. These delays – driven by supply chain disruptions, labour shortages, and production bottlenecks – have extended well into 2025, forcing airlines in Brazil to adjust their renewal timelines. Compounding the chal - lenge is the fact that aircraft costs, including PDPs, remain tied to the United States dollar, putting addi - tional pressure on Brazilian airlines amid ongoing FX volatility. As a result, carriers have increasingly turned to wet leases, used aircraft acquisitions, and hybrid fleet solutions to bridge capacity gaps and maintain net - work commitments. These interim measures offer flex - ibility while deferring capital-intensive investments, helping airlines manage both operational continuity and financial exposure during a period of supply-side uncertainty. In addition to aircraft delivery delays, engine OEM sup - ply and reliability issues are further constraining fleet planning for Brazilian airlines in 2025. Major engine manufacturers are grappling with component short - ages, maintenance, repair, and overhaul (MRO) back - logs, and ongoing technical concerns, especially with newer-generation engines. These challenges have led to grounded aircraft, extended turnaround times for engine overhauls, and reduced fleet availability for carriers across Latin America, including Brazil. Despite short-term friction, structural trends point to strong potential for Brazil’s aviation sector going for - ward. Brazil’s domestic air travel continues to recover
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