Originally published in the May 29 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil has introduced changes to the financial transactions tax (IOF) rules applicable to currency exchange, insurance, loan, and financing transactions.
The amendments are among the acts implementing the measures of the new Productive Development Policy (PDP) announced on May 12.
Decree No. 6,453/2008, published in Brazil’s official gazette of May 13, once again changed Decree No. 6,306/2007, the IOF Regulation. The new IOF rules are summarized below:
Under the new IOF rules, a zero rate applies for credit transactions carried out by Brazil’s National Bank for Economic and Social Development or its agents, or by state-owned financing company FINEP. (A 0.38 percent rate was imposed on those transactions by Decree No. 6,339, of January 3, 2008.)
The IOF rate applicable to credit transactions made by the state-owned financing agency FINAME is reduced from 0.38 percent to 0 percent. (The 0.38 percent rate was introduced by Decree No. 6,339, of January 3, 2008.)
The new rules clarify that the 1.5 percent IOF rate levied on currency exchanges (inflows) for investment in Brazilian capital markets also applies to simultaneous exchange transactions (that is, where funds are deemed to leave and enter the country at the same moment).
The new rules also clarify that the zero IOF rate applicable to purchases of foreign currency by Brazilian banks also applies to simultaneous exchange transactions.
David Roberto R. Soares da Silva