The increase in the tax burden on investments in Brazil
Since September 20, 2021, Brazil has increased its tax burden on credit operations carried out by companies and also, as a consequence, on its investment financing, working capital financing and reimbursement financing plans. advance of receivables, as well as on personal credit contracted for the acquisition of durable and consumer goods.
The Brazilian tax on financial transactions (“Imposto sobre Operações Financeiras – IOF”) is a federal tax levied on credit transactions (financial transactions), foreign exchange transactions, insurance and investment securities, withheld and collected by banks, foreign exchange brokers, insurance companies and financial institutions, as well as on general credit concessions.
Therefore, the IOF impacts, for example, as a rule, all transactions involving the exchange of financial assets, such as, among others, purchases abroad with credit cards, prepaid cards, l ” purchase and sale of foreign currencies (exchange) the purchase of insurance policies and the repurchase of securities.
For purchases made abroad (even via the Internet) with international credit cards and prepaid cards, in foreign currency, the IOF was and remains high, at 6.38% of the value of the purchases.
The IOF due on loans and financing contracted by companies, which was 0.0082% per day, i.e. equivalent to an annual rate (365 days) of 3.0%, added to the rate of 0.38% on the total amount of the loan was increased to 0.01118% per day (4.08% per year), increased by the same rate of 0.38% of the total amount of the loan.
For credit transactions carried out by individuals, the daily rate fell from 0.041% (1.5% per year) to 0.00559% (2.04% per year), plus the same 0.38%.
It should also be noted that the IOF is also, as a rule, levied on foreign exchange transactions, i.e. the purchase or sale of euros, dollars and other foreign currencies, for the settlement of international transactions, external financing, international purchases with credit cards, remittances from Brazil abroad and from abroad to Brazil (including transfers between bank accounts of the same owner), among others.
Although, in this type of financial transaction (foreign exchange), the maximum rate applied can be up to 25%, in practice it varies from case to case. Since sending money from abroad to Brazil, for example, is subject to the IOF rate of 0.38%, including transfers between bank accounts of the same owner. In case of sending funds from Brazil abroad between accounts of the same owner, the applicable rate is 1.1% or 0.38% between accounts of different owners.
Thus, on the purchase of Euro, Dollar and other foreign currencies from banks and foreign exchange brokers, the IOF rate therefore corresponds to 1.1%.
Finally, it should be noted that, in addition to the recent increase in fiscal pressure, analysts’ estimate predicts that the base interest rate of the Brazilian economy (“Taxa SELIC”) fixed periodically by the Central Bank of Brazil, which at the start of this year 2021 was at 2% and, in August, reached 5.25%, it is expected to reach at the end of the year, according to market analysts, at 7.25%.