Say Goodbye to IOF

We’ve covered IOF in the past. And as much as we’d like to see the tax disappear completely, it’s safe to say it’ll still be around for some time. But at least now, we know there’s an end in sight for certain types of transactions.

IOF or Imposto sobre Operações Financeiras is a financial transactions tax that’s applied to many commercial and banking transactions. Making a purchase with a credit or debit card outside Brazil? Getting a loan from a Brazilian bank? Expect to pay IOF. Even wiring money to a Brazilian bank account is subject to IOF. The amount you’ll pay, however, depends on the particular transaction.

But things are changing. Purchases abroad made with Brazilian credit cards will see a reduction in IOF starting in 2023. The rate was 6.38%. The new rate is 5.38%. And by 2028, the rate will be down to zero. The same is true for purchases made in Brazil but on websites outside Brazil. Payments made with credit cards on websites in Brazil aren’t subject to IOF.

Foreign exchange transactions will also see a similar reduction. The general rate on foreign exchange transactions will go from 0.38% to zero by 2029. So no more getting taxed on sending funds to Brazil to capitalize your company.

Taxes in Brazil are complicated. And IOF, in particular, is frustrating because it’s been applied to so many types of business transactions in the past. But within just a few years, you’ll be able to say goodbye to IOF on at least some transactions.