By means of Decree No. 8263, of June 3, 2014 (Decree 8263/2014), published in the Official Gazette of the Union of June 4, 2014, the Brazilian Federal Government decided to reduce to six months the term of the foreign currency loans which are subject to the tax on exchange transactions (IOF) at the rate of 6%. This change was introduced by Decree 8263/2014 which contains the new wording for item XXII of article 15-A of the IOF Regulation approved by Decree No. 6306, of December 14, 2007.

From now on, the IOF which is assessed on the entry of funds into the country or through symbolic exchange transactions is applicable to any foreign currency loans contracted as from June 4, 2014 with an average minimum maturity term of 180 days and comprises all form of loans which are subject to registration with the Central Bank of Brazil (Banco Central do Brasil - Bacen). This measure includes direct loans (either banking or intercompany loans) as well as bond issues in the international market, and also symbolic exchange transactions for the renewal, renegotiation or transfer of existing loans.

In the event of bond issues with total or partial acceleration maturity clause in favor of the creditor (put option) or the debtor (call option), for IOF purposes, the term of the transaction will counted as from the first date for the put or call option, as the case may be.

For transactions exceeding the 180 day-period, there is no such taxation, because the applicable IOF rate is zero.

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.