Brazil: study abroad exempt from new overseas payment tax

Study abroad programmes will be exempt from a new 25% tax on overseas payments that was announced last week, the Department of Federal Revenue has announced, prompting a sigh of relief among stakeholders that send and receive Brazilian students abroad.

The new levy prompted widespread concern in the study abroad sector last week as the tourism ministry announced that it would end a tax exemption for overseas payments abroad for study programmes and tourism services.

However, it has now announced that education programmes will continue to be exempt from the tax.

The announcement has calmed Brazilian agencies, many of whom were concerned about the impact on their business if costs were passed onto students.Speaking with The PIE News, a spokesperson for the Receita Federal confirmed: “There was no change in the legislation for consignments for educational purposes (such as remittances abroad aimed to cover educational exchange expenses), which are still not being subject to withholding tax.”

“It’s a big relief; unfortunately it’s Brazil we are always afraid about new changes, as this government spent too much money and needs to increase tax,” Thiago España, director of the agency World Study, said.

“We have pressure enough to our students because of the exchange rate.”

However, the ministry has yet to confirm whether the tax will apply to additional services related to study abroad, such as accommodation.

“The cancellation of the extra tax will obviously come as a great relief to both students and agencies and a huge boost to anyone planning to recruit students from Brazil,” commented Samir Zaveri, president and CEO of international education events organiser, BMI. “However, it is still unclear if this will relate just to the course fee or also to all costs such as air travel and accommodation.”

“If associated costs such as accommodation, insurance etc. are affected, institutions may be able to help students and local agencies by increasing the cost of courses to include these costs rather than bill them separately,” he added.

José Carlos Hauer Santos, president of study and travel agency giant STB, also said that education agencies will have to “wait and see” which services will be affected.

“We will advocate this as being part of the education programme coming on the same invoice,” he said.

Where applicable, the taxes will be levied on the overseas companies, but will be collected at the point of sale via the method of transfer, such as a foreign exchange company or bank.”

The Receita Federal spokesperson added that double-taxation agreements with foreign governments will ensure that overseas companies are not taxed twice; for example, taxes on incoming foreign students by the domestic government will be deducted from the tax taken by the Brazilian government.

Some banks have already started adding the tax to overseas transactions, according to Zaveri, despite it not yet having officially come into force. As a result, he said, many students are currently opting to pay by credit card as they have not yet started adding the tax.

The education agency association Belta said that it is aiming to ensure that FX companies and banks are aware of the exemption for study programmes and do not charge students for these payments.

“Belta, which has constantly positioned itself against any such taxing, is reaching out to financial institutions to ensure that any money sent overseas to agencies is not taxed,” its CFO, Marcelo Melo, said.

Meanwhile, Zaveri predicted that many students “may take the opportunity to make payments that they have to make in the future now”, before all foreign transfer and credit card companies implement the tax, to avoid any extra charges on services like accommodation and insurance.
The tax will be levied only on payments made within Brazil, and will not apply to payments made in-country to hotels or other service providers.

The Ministry of Tourism has also confirmed that personal transfers – for example, from a family member to a student overseas – will not be subject to the tax, and that Brazilian travellers may carry up to US$10,000 when travelling overseas tax.