Increase in tax on financial transactions impacts Brazilian insurance and reinsurance market

On May 22, 2025, the Brazilian Federal Government issued Decree No. 12,466/2025, amending Decree No. 6,306/2007 and increasing the rates of the Tax on Financial Transactions (“IOF”) applicable to credit (“IOF/Credit”), foreign exchange (“IOF/FX”), and insurance (“IOF/Insurance”) transactions.

Following strong market backlash, a new regulation—Decree No. 12,499/2025—was published on June 11, 2025, introducing adjustments to the IOF increase package (further details below).

Specifically for the insurance and reinsurance markets, the main impacts of the IOF increase introduced by the new decrees are as follows:

IOF/Insurance – Impact on life insurance policies with survival benefit

A 5% IOF rate will be levied if the individual contributions to life insurance policies that include a survival benefit exceed:

• BRL 600,000 in total annual contributions made to one or more insurance companies starting January 1, 2026; or
• BRL 300,000 in total annual contributions made to a single insurance company between June 11, 025, and December 31, 2025.

In these cases, the 5% rate applies only to the amount exceeding the BRL 600,000 or BRL 300,000 thresholds, respectively—not to the full amount contributed, as originally proposed in the first decree.

In contrast, the following contributions remain exempt (zero IOF rate):

• Contributions by individuals that do not exceed BRL 600,000 per year (from January 1, 2026) or BRL 300,000 (between June 11 and December 31, 2025); and
• Contributions by employers (legal entities) to fund life insurance plans with survival benefit for their employees—an exemption not included in Decree No. 12,466.

In order to comply with the new rules, insurance companies must provide policyholders with a channel to report contributions made to other plans.

According to the Federal Government’s economic department, this legislative update aims, among other targets, to prevent insurance products from being used inappropriately as investment vehicles and, as a result, preserve their intended function as retirement planning tools.

Additionally, on June 4, 2025, the Ministry of Finance issued Normative Ordinance No. 1,215/2025, extending the IOF/Insurance payment deadlines for transactions occurred between May 23, 2025, and June 25, 2025.

IOF/FX – Impact on reinsurance transactions

The IOF rate on “foreign exchange transactions for the transfer of funds abroad” has been increased from 0.38% to 3.5%, directly affecting the remittance of reinsurance premiums to international reinsurers.

Although such transactions were already subject to the IOF, the previous rate was significantly lower. Therefore, this sharp increase will impact such transactions significantly.

For inward remittance, the 0.38% IOF rate will continue to be levied on transactions involving reinsurance recoverables paid by international reinsurance companies.

The IOF taxpayer in foreign exchange transactions is the ceding insurer. Effectively, however, the parties involved may allocate tax liability contractually. Given the new regulatory landscape, it is recommended that reinsurance agreements be reviewed and, if necessary, renegotiated to address this issue.

Decree No. 12,499/2025 entered into force immediately after its publication, on June 11, 2025, given that the IOF is an extrafiscal tax not subject to the principle of anteriority.

Please refer to the client alerts published by Demarest’s Tax team for a comprehensive overview of all updates.

Demarest’s Insurance, Reinsurance, Health and Private Pension, and Tax teams are monitoring developments closely and remain available to provide any further clarification that may be necessary.