IOF/FX - Rate Reduction
On June 05, 2013, Decree No. 8,023 ("Decree
8,023/2013") was published on the Official Gazette,
introducing relevant changes on the Tax on Financial Transactions
Regulations ("RIOF"), approved by Decree No. 6,306, dated
December 14, 2007.
The measure, which was announced last night by the Ministry of Finance Guido Mantega, aims to boost the inflow of funds in Brazil and minimize the devaluation of the Brazilian Real in relation to the American Dollar and, consequently, the inflationary pressure.
Items XI and XII of article 15-A of the RIOF were amended so as to reduce from 6% to zero percent the rate of the tax levied upon foreign exchange transactions ("IOF/FX") carried out in connection with the inflow of funds of foreign investors for purposes of investments in the Brazilian financial and capital markets.
Prior to the new rule, only the inflows related to transactions carried out on the stock exchange, IPOs, investment in private equity funds, and investments related to bonds and securities issued to fund investment projects were subject to such zero percent rate. As of today, these exceptions have become the rule, so that the inflow of funds related to any foreign investment in the Brazilian financial and capital markets will benefit from the mentioned zero percent rate.
Note that the 6% rate remains in force for the liquidation of exchange transactions related to the inflow of funds in connection to foreign loans subject to registration before the Brazilian Central Bank ("BACEN"), with minimum average term shorter than 360 days.
The Decree 8,023/2013 shall enter into force on the date of its publication, i.e. June 05, 2013. However, the Decree does not clarify the tax treatment applicable to foreign exchange transactions entered into before this date and liquidated as from today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.