3/30/2022
On March 16th, the decree No.10.997/2022 was published, reducing the Financial Transactions Tax (IOF) rate on exchange operations.
This measure has been discussed since the beginning of this year and aims to make the flow of Brazilian capital abroad more flexible and specially to observe one of the requirements to Brazil join the Organization for Economic Co-operation and Development (OECD).
The reduction of the tax on foreign exchange results in the liberalization of capital movement and the improvement of the national scenario for operations with foreign currency, a practice already followed by all current members of the OECD.
As a consequence, the rate reduction will benefit four transactions subject to Financial Transactions Tax (IOF) on Exchange:
- On the entry of resources for foreign loans, even in simultaneous transactions, with an average term up to 180 days: the rate of 6% was reduced to 0% as of three days after publication of the decree;
- In the transactions with debit and credit cards arising from the acquisition of goods and services from abroad and withdrawals abroad: gradual reduction of the rate starting at 5,58% in February 2023 and ending at 5,38% in February 2028.
- In the exchange transactions for the acquisition of foreign currency and transfer of funds residents in the country for availability abroad: rate of 1,1% that will be reduced to 0% in February 2028.
- In the exchange transactions in general: the 0,38% rate, currently applicable to Exchange transactions, will be reduced to 0% in February 2029.
The initial changes above are effective since March 19th.
Our Tax team is available to provide further information and guidance on these and other topics.
Author: Camila Caçador Xavier
