Part of the foreign exchange transfers abroad, which had not yet been adapted to the rules of the Organization for Economic Cooperation and Development (OECD), will have a gradual reduction in the Tax on Financial Operations (IOF) as of 2023. A decree signed today (28 ) at night by President Jair Bolsonaro included new modalities of transfers between Brazil and abroad in the list of operations that will now pay less tax.
In a statement, the General Secretariat of the Presidency of the Republic informed that the measure is valid for a certain type of transfer that was not yet supported by the new legislation. The measure will apply to “transfers of funds in national currency, held by foreigners in deposit accounts in Brazil”.
The General Secretariat also reported that the decree covers transfers of funds “derived from obligations of participants in international payment arrangements related to the acquisition of goods and services from abroad and withdrawals abroad by end-users of said arrangements”. As it is a decree, the reduction of the tax does not depend on approval by the National Congress.
Until the end of the night, neither the Planalto Palace nor the Federal Revenue had detailed the rate of reduction of the rates, nor if the IOF will be zeroed in 2028 or in 2029. over the next few years.
Timeline
In March, another decree had introduced a schedule for reducing the IOF on foreign exchange transactions. The tax on loans made abroad, which was 6%, was immediately zeroed. The rates on the use of international credit cards, currently at 6.38%, will drop one percentage point per year between 2023 and 2027. In 2028, they will be reduced from 1.38% to 0%.
The IOF tax of 1.1% for the purchase of foreign currency in cash will be zeroed in 2028. Other foreign exchange transactions, which pay 0.38%, will be exempt from 2029. The exchange tax is being eliminated at few to adapt to the OECD rules, which do not recommend taxation on foreign exchange transactions. In early June, the organization approved the Brazil’s accession plan to the groupwhich brings together the most industrialized economies on the planet.
