Reduces tax rates on foreign exchange transactions

On 15 March, the Brazilian Government issued Decree No. 10.997, which gradually reduces the tax rate of the "Imposto sobre Operaçoes Financeiras" (IOF), a tax on certain foreign exchange operations.

Under current legislation, tax rates for IOF vary between 0.38 and 6.38 per cent. Upon entry into force of Decree 10.997, tax rate on some specific operations (namely inbound loans with an average term not exceeding 180 days) will be reduced to zero. Taxes on other foreign exchange transactions (i.e. credit and debit card transactions, money withdrawal abroad, currency exchange transactions for the acquisition of foreign currency in cash and wire transfers) which are currently subject to a to 6.38 per cent rate will be reduced gradually by 1 per cent per year from 2 January 2023 on until reaching zero per cent rate, starting 2 January 2028.

Among other objectives, the new regulation seeks to offer equal conditions to domestic and foreign economic operators investing in Brazil, as until today only the latter had to pay the tax in order to invest in the country.

The regulation was published on 16 March and will enter into force on 18 March 2022.

• Type:

  • Treatment and operation (Corporate taxation)
  • Treatment and operation (Capital transfer and FOREX)

• Industry:

  • Not industry specific

• Sources:

  • Diario Oficial da Uniao, DECRETO Nº 10.997, DE 15 DE MARÇO DE 2022 , https://www.in.gov.br/en/web/dou/-/decreto-n-10.997-de-15-de-marco-de-2022-386092390, 16 Mar 2022