Brazil’s IOF Tax on Financial Operations Returns, But Without Retroactive Charges
Investors in Brazil can breathe a sigh of relief as the reinstated tax on financial operations (IOF) will not be applied retroactively. This decision, clarified by Minister Alexandre de Moraes, provides temporary relief, especially for cryptocurrency investors who traded during the tax’s suspension.
The clarification came in response to a request from the Federation of Industries of the State of Paraná (FIEP), which advocated for the IOF’s return to be effective only from the date of publication forward. FIEP emphasized the practical consequences of retroactive application, urging that the decision should only have prospective effects.
The partial reinstatement of the IOF took effect on July 16, 2025. Consequently, cryptocurrency investors are exempt from paying the extra tax on transactions made during the suspension period, which lasted from June 25 to July 16.
Details of the IOF Reinstatement
According to the Supreme Federal Court (STF), Minister Alexandre de Moraes partially restored the validity of the presidential decree that increased IOF rates. However, the suspension remains in place for the portion concerning the IOF’s application to “risco sacado” operations. The minister stated that the federal government did not deviate from its intended purpose in raising the rates.
The preliminary decision was made jointly in Declaratory Action of Constitutionality (ADC) 96 and Direct Actions of Unconstitutionality (ADIs) 7827 and 7839. These cases, all under the minister’s purview, were initiated by the President of the Republic, the Liberal Party (PL), and the Socialism and Liberty Party (PSOL). The full Supreme Court will review the determination at a later date.
Government’s Perspective
The return of the IOF in Brazil, even partially, is welcomed by the Lula administration, which originally proposed the measure. The Ministry of Finance released a statement praising Minister Moraes’ decision as significant.
“We acknowledge the decision of the Minister of the Supreme Federal Court (STF), Alexandre de Moraes, rapporteur of the precautionary measure in the declaratory action of constitutionality 96. After hearing all interested parties, the Minister rapporteur soberly formed his judgment. From this important decision, constitutional prerogatives were adequately reaffirmed. The decision contributes to the resumption of harmonization between the powers and represents how dialogue is fundamental for the return to institutional normality of the country,”
said the Ministry of Finance.
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