The discussion on the incidence of the Tax on Financial Operations (IOF) in resource transfers between companies belonging to the same economic group has gained prominence in current tax practice.
With the increasing adoption of integrated cash management structures (cash pooling), it is crucial to determine when these internal movements constitute actual taxable credit operations. Recent administrative and judicial decisions have recognized that intercompany financial flows, supported by legitimate contracts and reciprocal execution, do not give rise to IOF liability.
To mitigate tax risks, companies must observe the five key points outlined below:
1. The loan contract is the core element of the IOF taxable event: According to Article 13 of Law Nº. 9.779/1999, the IOF applies to credit operations, including those carried out between legal entities outside the financial system. However, when ruling on Theme 104, the Brazilian Supreme Court (STF) held that taxation only applies when such transactions follow the same conditions as those performed by financial institutions, particularly regarding the charging of interest or other forms of remuneration.
2. The current account contract is not to be confused with a loan agreement: Companies within the same group often enter intercompany current account agreements to facilitate reciprocal and temporary financial movements, with periodic adjustments and compensations that characterize cash management rather than a loan. This atypical contract, valid under Article 425 of the Civil Code, has an administrative nature and does not represent a credit operation. Therefore, when transactions occur without interest or fixed creditor-debtor positions, there is no IOF taxable event.
3. Economic substance should prevail over accounting form: Tax authorities often base assessments solely on accounting records, interpreting intercompany transactions as loans. However, IOF liability is determined by the legal and economic reality, not by the accounting form. The sole paragraph of Article 116 of the National Tax Code (CTN) authorizes disregarding acts that disguise the taxable event while allowing the taxpayer to prove that the transaction is merely operational and temporary, without a credit nature or tax incidence.
4. Contractual formalization is indispensable to mitigate tax risks: An intercompany current account agreement is essential to legitimize internal financial movements and must clearly state the absence of interest, periodic adjustments, and administrative purpose. It is crucial to maintain documentation demonstrating reciprocity and the absence of fixed creditor-debtor positions, ensuring consistency between the contract and actual practice to avoid presumptions of disguised loans and reduce fiscal risk.
5. The consolidation of precedents strengthens legal certainty but calls for caution: There is a growing trend, both administratively (before CARF) and judicially, recognizing that resource transfers between group entities through a current account agreement do not trigger IOF when lacking credit purpose. This understanding enhances the legal certainty of structures using mechanisms such as cash pooling.
Even when the above points of attention are observed, caution remains essential. Not every transaction labeled as a “current account” is automatically exempt from taxation. Whenever transfers are unilateral, involve interest, have a fixed term, or show a clear expectation of repayment, the transaction may be reclassified as a loan and thus become subject to IOF.
