With immediate effect, the Brazilian Federal Government raises IOF rates and requires companies to quickly adapt.
By Rafael Maniero.
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Legale Overseas, 932.
The Federal Government published, at the end of last week, decrees that change various rates of the Tax on Credit, Foreign Exchange, Insurance Operations, and those related to Securities or Financial Assets (IOF). In addition to increasing the applied percentages, the new rules revoke planned reductions.
Despite the legality of the method employed, the decree raises a debate about the legitimacy of using the IOF for revenue-raising purposes, given its extrafiscal nature (which is intended to encourage or discourage certain activities). When presenting the measure, the Brazilian Federal Government made it very clear that its goal is to achieve fiscal balance.
The decrees were enacted with immediate effect and, therefore, the new rates are already in force, except for the IOF applicable to financing operations and supply chain financing (known as “risco sacado”), which will take effect on June 1, 2025. Thus, it is advisable for companies to take urgent action.
Key changes include:
• Increase in the IOF-Credit rate applicable to credit operations for corporate borrowers to 0.0082% per day, plus an additional rate of 0.95%. For companies under the Simples Nacional regime and Micro-Entrepreneurs (MEI) with loan amounts below R$ 30,000, the rate will be 0.00274% per day, plus the additional 0.95%;
• Inclusion of supply chain financing transactions (“risco sacado” – transactions involving early payments to suppliers and supplier financing) in the list of credit operations subject to IOF-Credit;
• Restriction of the zero IOF-Credit rate for operations where cooperatives are borrowers. From now on, only cooperatives with total credit operations, as creditor and borrower, below R$ 100 million in the previous calendar year will qualify for the zero rate;
• Establishment of a 3.5% IOF-Foreign Exchange rate for various situations, such as:
o Inflow of funds into Brazil for short-term loans (with a minimum average term of up to 364 days) – previously zero;
o Purchase of foreign currency in cash – previously 1.1%;
o Foreign exchange operations related to capital reduction or divestments by foreign investors – previously 0.38%;
o Transfer of funds abroad by residents or their family members as available funds, unless the transfer is for investment purposes, in which case the rate remains at 1.1% (previously all these operations were subject to 1.1%);
o Transfers abroad not specifically provided for by law — general rule — while the rate for inbound transfers remains at 0.38% (previously, both inbound and outbound transfers were subject to 0.38%);
• Despite the increase in several rates, some operations remain subject to a zero IOF rate, such as: (i) import and export transactions; (ii) remittance of dividends and interest on equity; (iii) inflow and repatriation of funds by foreign investors; (iv) loans and financing from abroad that are not considered short-term (i.e., with an average term over 364 days); (v) interbank operations; (vi) transfers related to investments in funds abroad, among others;
• Introduction of IOF-Insurance on amounts contributed to life insurance plans with survival coverage, whenever the monthly contribution — considering all plans held by the insured — exceeds R$ 50,000.
Due to the numerous changes enacted and the immediate effect of most of the new rates, companies are advised to take urgent measures, whether to adjust the IOF calculation or to evaluate legal alternatives.
Vaz de Almeida Advogados is closely monitoring the developments related to these changes in tax legislation and is ready to provide support in impact analysis, adaptation of tax procedures, and the possible filing of legal actions.
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