Tax | Brazilian Tax on Financial Transactions (IOF) is Reduced to Zero on Direct Loans Maturing Below 180 Days

New Brazilian legislation reduces the Tax on Financial Transactions (known as “IOF” tax) applied to foreign direct loans (4131) or bond issuances raised outside Brazil.

The Brazilian government signed the Decree 10,997 that brings significant changes to the tax burden applied over foreign lending in Brazil. 

With respect to direct loans (or 4131 financing) and bonds raising funds from foreign investors, IOF tax was charged at 6% when the tenor of the financing was below 180 days.

From now on, such tax is reduced to zero.

The Decree also provides for a schedule of annual reduction in IOF rates over certain foreign exchange transactions starting January 2023, aiming to zero IOF rate until January 2029.


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