Brazil’s Tax on International Bank Transfers

We know, you really want to buy that house. The value of Brazil’s currency is down and now’s a perfect time to invest in real estate. So you’ve found your new home, you’ve signed the contract and now you just need to pay.

And that’s where you hit a snag.

We’ve written before about the challenges of sending money to Brazil. But it’s not just the logistics of the transaction that can prove difficult. It’s also the calculation of tax and fees.

Financial transactions in Brazil are subject to the Imposto sobre Operações Financeiras (IOF). This includes foreign exchange transactions resulting from international wire transfers. The IOF rate changes based on the specific transaction type and can also vary from time to time. In recent months, the IOF rate has been as low as 0%. Yet for certain transactions, it has exceeded 6%.

Assuming you’re sending in US dollars, you’ll need to account for the exchange rate to convert the funds to Brazilian reais as well as any other bank fees. If there’s an intermediary bank, you’ll want to know that too. Remember that the exchange rate changes quickly, so it may not be the same when you send the funds and when they are received.

The real challenge facing international investors is calculating the exchange rate and applicable IOF tax to ensure that a sufficient amount of money is sent to pay not only the tax and fees but also the purchase price. To the extent possible, you want to send just the right amount - no more and no less.