Brazil: Reduction of tax rate related to Tax on Financial Transactions (“IOF”)

On March 16, 2022, Decree 10,997 was published, establishing a staggered reduction of the Brazilian Tax on Financial Transactions (IOF) levied on currency exchange transactions.

This measure is part of the movement to adhere to the Codes of Liberalization of Capital Movement and Invisible Operations, which is essential to the Organization for Economic Co-operation and Development (OECD).

The decree establishes a tax rate of 0% for short-term foreign loans (less than 180 days). In addition, it reduces to 0% the tax rate for the acquisition of foreign currency in cash from 2028 onwards and sets the following decreases in tax rates for credit card transactions:

i. From 6.38% to 5.38% from January 2, 2023
ii. From 5.38% to 4.38% from January 2, 2024
iii. From 4.38% to 3.38% from January 2, 2025
iv. From 3.38% to 2.38% from January 2, 2026
v. From 2.38% to 1.38% from January 2, 2027
vi. From 1.38% to 0% from January 2, 2028

The applicable tax rate is determined by the date of the credit card transaction.