Brazil approves Tax-Free Program for foreign tourists and aims to boost consumption
By allowing foreign tourists to request a refund of taxes paid on products purchased in the country, Brazil is adopting a fiscal policy already well-established in major tourist destinations.
The measure corrects the distortion of taxing consumption that, in practice, does not occur domestically.
Initially, the refund will be limited to the ICMS (state VAT), but with the implementation of the tax reform, it will also cover the IBS and CBS (learn more here => https://lnkd.in/dXRcZ-WN). In other words, the model is already designed to transition to the new tax system—an institutional achievement that is rare in Brazil.
The impact is expected to be significant.
Studies show that tourist spending can increase by over 20% with the exemption, directly benefiting retail, hospitality, and service sectors.
Contrary to what some might assume, this is not about sacrificing tax revenue, but rather exchanging a symbolic source of income for a more consistent and long-term gain through increased capital flow and job creation.
However, attention must be paid to how this mechanism is implemented.
If each state adopts different criteria, the system could become bureaucratic and ineffective—the exact opposite of what is expected from a program aimed at international tourists. Simplifying processes and digitizing the refund experience should be top priorities.
Moreover, the incentive will only work if retail businesses participate and are engaged, which depends on the creation of simple, secure, and financially feasible mechanisms to enable refunds.
These measures are essential to ensure the model exists in practice—and not just on paper.
Ultimately, the success of Brazil’s Tax-Free program will depend on the country’s ability to implement it efficiently, in a predictable and scalable manner. And we are confident this will happen.
Luciene Grubbs | Founder