On 22 May 2025, the Brazilian Government issued Decree 12,466/2025, raising the rate of the Tax on Financial Transactions (IOF) to increase federal revenue.

Among the key changes, the government introduced a 3.5% IOF rate on investments made abroad by Brazilian investment funds, which had previously been exempt. Additionally, the IOF rate on cash foreign currency purchases was raised from 1.1% to 3.5%.

Following strong negative reactions, the government reversed course the very next day by issuing Decree 12,467/2025, reinstating a zero rate for foreign investments by Brazilian funds, thereby revoking the newly imposed 3.5% rate.

On Wednesday, 11 June, the government published two additional measures with significant impact on Brazil’s tax system: Interim Measure 1,303/2025 and Decree 12,499/2025.

Interim Measure 1,303/2025 broadened taxation on certain types of investments and on private credit instruments. The new decree repealed the earlier IOF rate increases and redefined the circumstances under which the IOF applies.

Interim Measure 1,303/2025: Expanding Brazil’s Tax Base Across Multiple Market Sectors

The new legislation introduces several changes to the Brazilian tax system, including:

• A 5% withholding income tax on previously exempt investments, such as LCI (Real Estate Credit Bills), LCA (Agribusiness Credit Bills), CRI (Certificates of Real Estate Receivables), CRA (Certificates of Receivables of the Agribusiness), CPR (Rural Product Notes), covered bonds, incentivized debentures, and investments in units of FIIs (Real Estate Investment Funds) and Fiagros (Agribusiness Investment Funds) ;
• Discontinuation of the progressive income tax rate table for financial investments, replaced by a flat 17.5% rate on most earnings;
• Increase in the tax rate on interest on net equity (JCP) from 15% to 20%;
• Increase in the Social Contribution on Net Income (CSLL) rate for fintech companies from 9% to 15%;
• Higher taxation on crypto-assets, with a new 17.5% rate effective from 2026;
• Increase in the tax rate on online betting (BETs) from 12% to 18%.

The changes related to income tax, interest on net equity, and crypto-assets will take effect on 1 January 2026, while the other measures will apply starting 1 October 2025. The Interim Measure will now proceed to review by the National Congress, where it may be approved, amended, or rejected. If not converted into law within 120 days, it will lose effectiveness and its provisions will be nullified.

Decree 12,499/2025: Changes to the IOF

Effective as of its publication date, the decree maintained the 3.5% IOF rate on most outbound international transfers and broadened its scope, introducing specific rates for the following transactions:

• Credit granted to businesses: reduced from 0.95% to 0.38%;
• Supplier Receivables Financing transactions : subject only to a daily rate of 0.0082%, with no fixed fee;
• Overseas transfers for investment purposes: 1.10%;
• Non-exempt foreign exchange transactions: 0.38%;
• Primary acquisition of FIDC (Financial Investment Funds in Credit Rights) units: 0.38%, effective from 14 June 2025;
• Foreign exchange using prepaid cards and traveler’s checks: 3.5%;
• Settlement of foreign exchange transactions for inbound funds: 3.5%;
• Cash foreign currency purchases: 3.5%;
• Outbound transfers and payments for goods and services: 3.5%;
• Cash withdrawals abroad: 3.5%;
• Repatriation of foreign direct investment: IOF exempt;
• Contributions to VGBL (Life Insurance Plans with Survival Coverage): until 31 December 2025, the IOF applies only to contributions exceeding BRL 300,000; as of 1 January 2026, it applies to contributions over BRL 600,000.

Except where otherwise provided, the new rates take immediate effect as of 11 June 2025.