ANNOUNCED AS TEMPORARYNo
Controls on commercial transactions and investment instruments
On May 2, 2016, Decree 8,731 was published on the Official Gazette of Brazil increasing to 1.10% the applicable IOF to the purchase of foreign currency. The previous applicable IOF tax was set at 0.38%.
The IOF is a tax levied on any lending/borrowing transaction; or any conversion of foreign currency into Brazilian Reais (BRL), or vice-versa; and on any issuance, purchase, sale, redemption or liquidation of securities, including quotas of funds or bonds.
In the cases of loans, even though the borrower is the taxpayer, the creditor is responsible for calculating, withholding and collecting this tax.
As to foreign currency conversions, and more specifically in the case of a borrowing/lending transactions, the IOF is levied on inflows and outflows of funds corresponding to loans obtained from, or granted to, foreign entities or persons.
This tax emerged to control foreign capital inflows/outflows since the appreciation of the Brazilian real was hurting the manufacturing sector in the country.
For more information on the evolution of this tax, please see related state acts.
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