Brazil: Financial transaction tax (IOF), loans | KPMG | GLOBAL

Brazil: Financial transaction tax (IOF) on foreign exchange transactions, loans

Brazil: Financial transaction tax (IOF), loans

There are changes to the financial transaction tax with respect to foreign exchange transactions and foreign loans.


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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.

  • IOF is imposed at a rate of 1.10% on foreign exchange transactions regarding the purchase of foreign currency in kind (an increase from the prior IOF rate of 0.38%).
  • Concerning the conversion of foreign direct investment into investment in stocks, the decree established that foreign exchange transactions for the inflow of funds into Brazil (even if with respect to simultaneous and cash-less exchange transactions) implemented for the conversion of a foreign direct investment into investment in stocks / shares traded on the stock exchange are subject to IOF at a rate of 0%. 
  • Concerning foreign loans (debt funding), the decree identified changes that may affect the anticipated liquidation of foreign loans. Thus, transactions involving the anticipated liquidation and/or capitalization of foreign loans now need to be analyzed on a case-by-case basis so that the potential IOF and foreign exchange effects are properly assessed.

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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