In Brazil, a federal tax is levied on credit, exchange, insurance and securities transactions executed through financial institutions—and includes intercompany loans. The tax also applies to gold transactions.
The rates of the financial transaction tax (Imposto Sobre Operações Financeiras—IOF) can be increased / reduced by Brazil’s federal government by decree, with such changes being effective immediately. The tax base varies depending on the taxable event and the financial nature of the transaction.
Decree 8,731 provides for changes to the application of IOF with respect to foreign exchange transactions.
Historically, with respect to foreign loans, IOF is imposed (1) at a rate of 6% if the weighted average maturity of the loan is less than six months; or (2) at a rate of 0% if the period for maturity of the loan is greater than six months. If the loan is initially granted having a maturity greater than six months, but it is liquidated before the end of that term, IOF is due at the rate of 6% plus penalties and interest.
Read a July 2016 report prepared by the KPMG member firm in Brazil
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