Today it was published the Decree Nr. 7,693, dated February 29, 2012, which amended certain rules of the Tax on Financial Transactions Regulation ("RIOF"), approved by Decree Nr. 6,306, dated December 14, 2007, specially concerning the assessment of the tax on foreign exchange transactions ("IOF/FX") on the inflow of funds in Brazil.
In this sense, the minimum average term of foreign loans subject to the IOF/FX at a 6% rate, on the foreign exchange transaction related to the inflow of the respective funds in Brazil, was increased from 720 days to 3 years. Up until this date, the foreign exchange transactions carried out in connection with the inflow of funds related to foreign loans with minimum average term longer than 720 days were subject to the IOF/FX at a 6% rate. With the new rules, such zero percent rate is now applicable to foreign loan agreements which minimum average term is longer than 3 years.
It is important to note that the referred rate comprises the liquidation of exchange transactions contracted as of March 01, 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.
It is relevant to point out that the IOF/FX shall be levied at the 6% rate plus interest and penalties in case of earlier liquidation (partially or totally) that implicates in the non compliance with the minimum average term set forth by the new rules. Likewise, certain clauses (put/call) that enable the anticipated liquidation in a period lower than 3 years for debt bonds/notes issued abroad shall be carefully reviewed, due to the possibility of such transactions being taxed by the IOF/FX at a 6% rate.
Furthermore, Decree Nr. 7,683/12 expressly sets forth that the foreign exchange transactions, including symbolic and simultaneous transactions, carried out by foreign investors in connection with investments in Brazilian Depositary Receipts ("BDR"), under the conditions established by the Brazilian Securities Commission ("CVM"), are subject to IOF/FX at a zero percent rate.
At this point, although foreign exchange transactions for the acquisition of BDRs through transactions carried out within stock exchange were already subject to IOF/FX at a zero percent rate, the Decree Nr. 7,683/12 expressly clarifies that this rate is invariably applicable to the exchange transactions related to any acquisition of BDR by foreign investors, regardless of the trading environment in which the transactions are performed (achieving, this way, the acquisition of BDRs in initial public offerings which are only registered before the stock exchange).
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