The Tax on Financial Transactions (IOF) is a federal tax provided for in art. 153, item V of the Federal Constitution. Its function is not merely to collect taxes, but to intervene and regulate market situations, which justifies the ease with which its calculation can be modified.
Regulated by Decree no. 6.306/2007, it may be applied to five distinct situations: foreign exchange operations; insurance operations in general; credit operations; bonds and securities; and operations with gold.
Despite the importance of the tax on credit operations, that is, when financial assets are transferred between legal entities, or between individuals and legal entities, we propose here to comment on the recent changes made in the calculation of IOF on foreign exchange operations.
The IOF tax is charged on foreign exchange transactions upon delivery or availability of national or foreign currency, in cash or a document representing cash, and is calculated on the value in Real after conversion. The tax is due on settlement of the exchange operation and may be charged at a rate of up to 25%.
With a view to promoting greater economic integration of the country into the international community, Decree no. 10.997 was published on March 15, 2022, gradually reducing the IOF rates on foreign exchange transactions. The reduction also confirms the adoption of measures aimed at enabling the country to join the OECD (Organisation for Economic Cooperation and Development).
In the case of entry of funds into the country by way of a foreign loan, even through simultaneous operations, registered with the Central Bank of Brazil and with a minimum average term of up to 180 days, the rate has been reduced from 6% to zero, with the reduction being applied immediately.
The new decree has also regulated the gradual reduction of the tax on foreign exchange transactions for the purpose of complying with the obligations of credit and debit card companies or of cards for international use, in the cases specified therein, as well as on the acquisition of foreign currency in travellers checks and for loading prepaid international cards for journeys abroad. In this case, the rates will be reduced to: 5.38% as of January 2, 2023; 4.38% as of January 2, 2024; 3.38% as of January 2, 2025; 2.38% as of January 2, 2026; 1.38% as of January 2, 2027 and 0% as of January 2, 2028.
The 0.38% rate, currently applicable to foreign exchange operations in general, will be reduced to zero as of January 2, 2029, which in practice will result in a reduction to a zero rate for all operations, thereby enabling the country to be more competitive in the international arena.
The Stüssi-Neves team is at your disposal for any further explanation you may require.
Patrícia Giacomin Pádua
Partner in the Tax Area – São Paulo