Brazil's IOF Tax Hike: What You Need to Know

Brazil Raises IOF Tax on International Transactions Brazil recently implemented a new decree that increases the IOF (Imposto sobre Operações Financeiras) tax on various international financial transactions. This decision marks a reversal of the previous government's policy to gradually reduce the IOF, aiming for alignment with OECD standards. The most notable changes include a rise in the IOF for international purchases made with credit, debit, and prepaid cards. Previously decreasing annually, the tax has now jumped to 3.5%. This directly impacts Brazilians traveling abroad or making online international purchases. The IOF on international digital account cards has also increased from 1.1% to 3.5%. The same 3.5% rate applies to purchasing foreign currency in cash. A spokesperson from the Ministry of Finance stated, "The intention is to unify the rates and eliminate distortions that incentivized the use of international accounts for transactions with lower taxes." While the IOF on personal loans and overdrafts remains unchanged, businesses will face a higher IOF on credit operations, increasing to a maximum of 3.95% annually. This policy shift is expected to generate increased revenue for the government but may also impact consumer spending on international goods and services. The long-term effects on Brazilian consumers and businesses remain to be seen.