Covid-19 – The Brazilian Government extends IOF tax rate to zero on credit transactions

Decree No. 10,414/2020 was published today, extending the Financial Transactions Tax (“IOF”) rate to zero on credit transactions for another three months.

The IOF is generally levied on credit transactions by applying a daily rate (defined according to the nature of the borrower – legal entity or individual), limited in some modalities, plus an additional rate of 0.38%. These two rates were temporarily zeroed by Decree No. 10,305/2020.

This benefit was established by Decree No. 10,305/2020, which initially reduced the IOF rate to zero on credit transactions contracted between April 3, 2020 and July 3, 2020.

Decree No. 10,414/2020 amended Decree No. 10,305/2020, to set forth that the IOF zero rate shall be valid for credit transactions executed between April 3, 2020 and October 2, 2020. This measure includes all types of loans, including financing transactions, discount operations, including those arising from the sale of credit rights to factoring companies resulting from installment sales, advances to depositors, among others.

We are available to discuss how these changes can benefit your company, including in relation to certain types of credit transactions executed before Decree No. 10,305/2020 entered into force.