IOF Tax Increase – Federal government announces new rates in the IOF levied on foreign exchange, credit and insurance transactions

On May 22, 2025,the Brazilian federal government published Decree No. 12,466/2025, amending Decree No. 6,306/2007 and increasing the rates of the Financial Transactions Tax (“IOF”) levied on credit transactions (“IOF/Credit”), foreign exchange transactions (“IOF/FX”) and Insurance transactions (“IOF/Insurance”).

Given that it is considered a tax that does not have the sole objective of funding the government but also stimulates economic activities, the IOF is not subject to the grace period that applies to most taxes. Given this context, the new ruling concerning the IOF tax hike is effective from May 23, 2025. Changes concerning the advancements of receivables and the levy of IOF on such credit transactions had their effective date deferred to June 01, 2025.

It is worth noting that, following the amendments introduced by Decree No. 12,466/2025, the Executive Branch reversed certain measures and, through Decree No. 12,467/2025, reinstated the following IOF rates: (i) 0% on foreign exchange transactions involving transfers to and from abroad related to investments by investment funds in international markets; and (ii) 1.1% on foreign exchange transactions for the transfer of funds abroad aimed at making funds available by residents in Brazil for investment purposes. Scenario (ii) will be further regulated by the Brazilian Federal Revenue Service (“RFB”), providing a clear regulatory oversight.

Given the current scenario and the backlash such tax hikes are suffering, it is possible that further amendments on the subject may be published. In any case, the following slides summarize the main changes introduced thus far.

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