Decree Nr. 7.894, dated January 30, 2013, was published yesterday amending the Regulation of the Tax on Financial Transactions (Decree No. 6306 of 14 December 2007), concerning in particular the Tax on Foreign Exchange Transactions ("IOF /FX") levied upon the inflow of funds in Brazil. 

In particular, paragraph 3 was added to Article 15-A, in order to clarify that the provisions relating to exchange transactions carried out for the inflow of funds by foreign investors to invest in variable income assets  by means of a transaction carried out in the stock exchange or futures and commodities exchange (section XIII of Article 15-A), also apply, as of January 31, 2013, to transactions related to the purchase of Real Estate Investment Fund quotas ("FII"). 

In this sense, the new provision granted to the inflow of funds for the acquisition of FII quotas through the stock exchange, the same treatment established to the purchase of variable income assets in the same environment, which are currently subject to a zero rate of IOF/FX. Therefore, the new wording settles the doubts on whether or not the investments in FII quotas could be characterized as an investment in variable income assets, for the purposes of application of the 0% IOF/FX rate. 

On the other hand, while the exact extent of the new rule may give rise to differing interpretations, we consider that the reduced rate do not apply to private subscriptions or acquisitions of quotas in the over-the-counter markets (whether organized or not). 

Finally, even though the new rule enters in force as of January 31, 2013, there are arguments to support the same treatment even for previous transactions that have been effectively carried out in the stock exchange, provided that, given the particular characteristics of each fund, there is enough evidence to sustain, the characterization as variable income investment. 

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