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As a result of the reduction of the
liquidity in the international market, which affects the raising of
loans abroad by Brazilian borrowers and the inflow of foreign
currency funds into the country, the Brazilian government decided
to reduce from five to two years the term of the transactions which
are subject to the Brazilian Tax on Exchange Transactions
(Imposto sobre Operações de Crédito,
Câmbio e Seguro, ou relativas a Títulos ou Valores
Mobiliários - IOF) at the rate of 6%.
This measure was announced by means
of Decree No. 7751, of June 13, 2012 (Decree 7751/2012), published
in the Official Gazette of the Union of June 14, 2012 and comprises
all form of loans which are subject to registration with the
Central Bank of Brazil (Banco Central do Brasil - Bacen),
including not only direct loans (either banking or intercompany
loans) but also bond issues in the international market, and
symbolic exchange transaction for the renewal, renegotiation or
transfer of existing loans.
Therefore, the IOF which is assessed
on the entry of funds into Brazil or through symbolic exchange
transactions is now applicable to any foreign currency loans
contracted as from June 14, 2012 with an average minimum maturity
term of 720 days1.
From now on, only for transactions
exceeding the two year-period, there is no such taxation, because
the applicable IOF rate is zero. However, if and when a transaction
originally contracted for more than two year-period is prepaid,
partially or totally, without complying the average minimum
maturity term of two years, then the 6% IOF rate will apply, plus
interest in arrears and a fine, which may vary from 5% to 100% of
the total amount of the transaction, and a penalty of up to R$ 100
thousand to be imposed by Bacen.
The IOF is a regulatory tax and the
rates can be decreased or increased by the Executive Branch from
zero to 25% (ceiling) whenever the authorities decide to foster or
reduce the inflow of foreign currency funds into the country, in
accordance with the monetary and exchange policy goals adopted by
the Brazilian government.
Footnote
This change was introduced by
Decree 7751/2012 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.
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guide to the subject matter. Specialist advice should be sought
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