Brazil Increases Tax on Foreign Exchange Transactions Related to Foreign Investments in the Brazilian Financial and Capital Markets
Effective October 20, 2009, the Brazilian government increased the Tax on Financial Transactions (Imposto sobre Operações Financeiras, or IOF) related to foreign investments in the Brazilian financial and capital markets from zero to two percent. The IOF tax applies upon conversion of foreign currency into Brazilian reais related to equity or debt investments by foreign investors on the Brazilian stock exchanges (principally BM&F-BOVESPA) or the OTC market, as well as private investment funds (FIP), Brazilian treasury notes and other fixed income securities. The outflow of funds from Brazil to abroad, including for dividend payment and return of capital, remains subject to the zero percent rate.