On May 22, 2025, Decree No. 12,466 was published, increasing the tax rates of Tax on Financial Transactions ("IOF") levied on multiple operations of insurance, credit and exchange, especially the ones related to (i) credits between legal entities; (ii) forfait transactions; and (iii) exchanges related to short-term loans.
On May 23, Decree No. 12,467 was published, amending Decree No. 12,466/2025, which (i) re-established the zero-tax rate levied on investment made by Brazilian funds abroad; and (ii) set the 1.1% tax rate for foreign exchange operations involving the transfer of funds abroad to be made available to Brazilian residents for investments purposes.
Published on June 11, 2025, Decree No. 12,499 revoked these two earlier decrees, consolidating the changes to the in IOF legislation and reducing the increases promoted originally by Decree No. 12,466 in some operations, such as (i) credits between legal entities; and (ii) forfait transactions.
The controversy was submitted to the Federal Supreme Court ("STF") through Declaratory Action of Constitutionality ("ADC") No. 96 and Direct Actions of Unconstitutionality ("ADIs") No. 7,827 and 7,839. On July 4, Reporting Justice Alexandre de Moraes rendered a preliminary injunction—which was further modified by a new injunction rendered on July 16—to:
(i) Reinstate the effects of Decree No. 12,499/2025, which had promoted modification in the rates of IOF, since its issuance date (ex tunc), based on the understanding that there was no misuse of purpose in changing the IOF tax rates;
(ii) suspend the characterization of the forfeit transactions as a credit operation, promoted by the inclusion of §§ 15, 23 and 24 in Section 7 of Decree No. 6,306/2007 by the Decrees No. 12,466/2025, 12,467/2025 and 12,499/2025. Accordingly to the Reporting Justice, such characterization results on the creation of a new taxable event of IOF, which can only be made through law in compliance with the principle of tax legality (Section 150, I, of Federal Constitution). After that, the Reporting Justice Alexandre de Moraes reconsidered the decision that ordered the return to effectiveness of Decree No. 12.499/2025 since its issuance (ex tunc effects) with the purpose to clarify that, during the period covered by the suspension of the Executive Decrees, the increased tax rates of IOF were not applied, and retroactively increased rates are not applied.
After that, the Reporting Justice Alexandre de Moraes reconsidered the decision that ordered the return to effectiveness of Decree No. 12.499/2025 since its issuance (ex tunc effects) with the purpose to clarify that, during the period covered by the suspension of the Executive Decrees, the increased tax rates of IOF were not applied, and retroactively increased rates are not applied.
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