Decree Nr. 7,751, dated June 13, 2012, was published today amending certain rules of the Tax on Financial Transactions Regulation, concerning the tax on foreign exchange transactions ("IOF/FX") on the inflow of funds in Brazil raised through foreign loans.

In this sense, the minimum average term of foreign loans subject to the IOF/FX at a 6% rate, was decreased from 1,800 days (i.e. five years) to 720 days (i.e. two years). Therefore, with the new rules, the 0%IOF/FX rate is now applicable to foreign loan with minimum average term greater than 720 days.

It is important to note that the new provisions are applicable to the liquidation of exchange transactions contracted as of June 14, 2012 for the inflow of funds, including those transactions carried out in the form of symbolic and simultaneous transactions, related to foreign loans – which are subject to register before the Brazilian Central Bank ("BACEN") – contracted directly or through the issuance of bonds/ notes abroad. The outbound flows connected to such transactions (repayment of principal and payment of interests) are still subject to the 0% rate.

Unlike the various changes on IOF/FX rates that were recently focused on the past appreciation of the Brazilian Reais, the new provision and the actual foreign exchange rate suggests prudential measure to refrain an excessive depreciation of the Brazilian currency.

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