COVID-19 – Brazilian Government reduces IOF tax rate to zero on credit transactions

Among the measures published by the Brazilian Government last week to mitigate the impact of the coronavirus pandemic, Decree No. 10,305 was published on April 2, 2020, reducing the Financial Transactions Tax (IOF) rate to zero on credit transactions contracted between April 3, 2020 and July 3, 2020. According to the Federal Revenue, this measure aims to alleviate the tax burden on emergency credit lines.

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.

Before this measure, the IOF was levied on these 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.

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.

This e-alert is a general review of the subjects discussed above and does not constitute a legal opinion or legal consult. Please feel free to contact us should you need further clarification on this foregoing.