Decree increases the rate of the Tax Financial Operations (IOF)

On 09.07.2021, Decree No. 10797/2021 was published, which increases the rate of the Tax on Financial Operations (IOF) levied on credit operations between 09.20.2021 and 12.31.2021.
This Decree promotes the following changes:

(i) IOF due by the corporate borrower goes from 0.0041% per day to 0.00559% per day, maintaining the additional fixed rate of 0.38%, resulting in an increase for loans with terms of more than 1 year from 1.876% to 2.420%; and,

 (ii) IOF due by the individual borrower goes from 0.0082% per day to 0.01118% per day, maintaining the additional fixed rate of 0.38%, resulting in an increase for loans with terms of more than 1 year from 3.373% to 4.460%.

As informed by the Government, the increase in question aims to increase the collection to enable the implementation of the new social program called “Auxílio Brasil”.

This change is not an increment to the IOF rate in operations carried out by legal entities opting for the “Simples Nacional” tax regime, since item VI, of article 7, of Decree No. 6.306/2007 was not changed.

Considering the extrafiscal effect of the IOF, the increase in question will eventually increases the cost of loans and financing during the period in question, which may discourage new investments by the private sector in the country.