IOF/Exchange – Reduction of the maturity of foreign loans
Por Rodrigo Lara
In an effort to increase external funds to cope with the recent dollar hike, the Brazilian government has reduced from 360 days to 180 days the minimum average maturity for the financial transactions tax (IOF) to be levied on foreign loans taken out by Brazilian companies.
Thus, starting on June 4, the IOF will not be levied (zero rate) on the settlement of foreign exchange transactions relating to loans with a minimum average maturity equal to or greater than 180 days, while those with a maturity of less than 180 days will be taxed by the IOF at a 6% rate.
In practice, this measure reduces the cost of short-term indebtedness for companies and banks, which rely on foreign funds to finance their operations.