As of June 5, 2013 the Brazilian government decided to attract and foster the return of foreign investors to the Brazilian market by reducing from 6% to zero the applicable rate of the Tax on Financial Transactions (IOF)1 on fixed income instruments.
This reduction has been approved by means of Federal Decree No. 8023, of June 4, 20132, which amends article 15-A of Federal Decree No. 6306, of December 14, 2007 (the IOF Regulation), as follows:
"Art. 15-A ........
XI - the settlement of exchange transactions by foreign investors to inflow of funds in the country, including through simultaneous operations, for the constitution of guarantee margin, initial or additional, required by stock, commodities and futures exchanges: zero;
XII - the settlement of exchange transactions by foreign investors to inflow of funds in the country, including through simultaneous operations, for application in the financial and capital markets, excluding the operations referred to in items XIII, XIV, XV, XVII, XVIII and XXIII of the main section: zero;"
The IOF is a regulatory tax and the rates are decreased or increased by the Brazilian government whenever the authorities decide to foster or reduce the inflow of foreign currency funds into the country. It is assessed on the amount of bank loans and similar transactions, on the amount of foreign currency purchased or sold, on insurance premiums and the price of securities purchased or sold. The applicable tax rate may vary from zero to 25% and depends on the kind of the operation.
1 The official name of the Brazilian IOF is Imposto sobre Operações de Crédito, Câmbio e Seguro, ou relativas a Títulos ou Valores Mobiliários (tax on credit and exchange transactions, insurance and securities).
2 Decree 8023/2013 is in full force and effect as of June 5, 2013, date of its publication in the Official Gazette of the Union (Diário Oficial da União – DOU).
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