Brazil Reduces Foreign Capital Exchange Controls

The Brazilian Government decided to dismantle the capital constraint measures adopted previously to prevent the appreciation of the local currency (Real) to facilitate the raising of foreign credits by Brazilian companies, through foreign currency loans and export financing transactions that imply in the anticipation of funds to the Brazilian exporter by way of advance the export receipt, also known as Advance Payment (Pagamento Antecipado – PA). The new rules are outlined below.

I. Only foreign currency loans up to 360 days are subject to the Brazilian IOF

The term of the foreign currency loans which are subject to the Brazilian Tax on Exchange Transactions (Imposto sobre Operações de Crédito, Câmbio e Seguro, ou relativas a Títulos ou Valores Mobiliários - IOF) at the rate of 6% was reduced from 2 years (720 days) to one year (360 days). The IOF is a regulatory tax and the rates can be decreased or increased by the Executive Branch from zero to 25% (ceiling)