Changes in IOF Rules for 2011 – Tax on Foreign Currency Exchange and on Securities

On December 30^th, 2010, the Brazilian Federal Government enacted Decree n. 7412/2010 ("Decree 7412") which changed certain rules connected with the tax on foreign currency exchange ("IOF/Exchange") and on transactions with securities ("IOF/Securities"). The new rules are in force from January 1^st on.

There are remarkable changes with respect to IOF/Exchange and the financial and capital markets.

The general rule continues to be the imposition of IOF/Exchange at a 6% rate on investments made in the financial and capital markets, with the collection of such tax at a 2% rate in connection with variable-yield investments made in the stock exchange or in the over-the-counter market pursuant to the rules of the National Monetary Council (excluding derivatives with pre-determined income).