IOF/Bonds - Currency Related Derivatives Transactions? Rate Reduction

On June 13, 2013, Decree No. 8,027 (Decree 8,027/2013), dated June 12, 2013, was published on the Official Gazette, introducing a relevant change on the Tax on Financial Transactions Regulations (RIOF), approved by Decree No. 6,306, dated December 14, 2007 regarding the Tax on Securities Transactions (IOF/Bonds) levied upon currency related derivatives transactions, established in 2011.

The measure, which was announced last night by the Ministry of Finance Guido Mantega, has a purpose similar to the one that prompted the recent change related to the tax levied upon foreign exchange transactions (IOF/FX): to minimize the devaluation of the Brazilian Real in relation to the American Dollar and, consequently, the inflationary pressure.

Decree 8,027/2013 introduced Paragraph 15 on article 32-C of the RIOF, establishing that, as of June 13, 2013, the IOF/Bonds rate levied upon the adjusted notional value on the acquisition, sale or maturity of derivatives contracted in Brazil that, individually, result in the increase of the short position exposure or the reduction of the long position exposure, is reduced to zero. Prior to the new rule, the rate applicable to the mentioned transactions was 1%. Other derivative transactions remain subject to the zero percent rate.

The Decree 8,027/2013 shall enter into force on the date of its publication, i.e. June 13, 2013.

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.