Tax on Financial Operations
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What is IOF and how does it affect real estate financing?

There is nothing as present in the lives of Brazilians as taxes: they are many and they affect directly or indirectly in practically everything that people do. One of the most famous contributions is the IOF, seen on overdraft, in international purchases on credit cards and even in real estate financing.

However, although these rates are so commonplace in our daily lives, we do not always fully understand how they work. And do you know what the IOF is and how it works? In this post, we will explain what this tax is about, how to calculate it and how it affects real estate financing. Check out:

What is IOF?

IOF is the acronym used to designate the Tax on Financial Operations. As its name says, it is a tribute that focuses on the most diverse types of financial activity, such as credit, foreign exchange, financing, insurance or operations with bonds, securities and everything else you can imagine.

This contribution is considered as a regulatory tax and, like other taxes that have the same nature, it can be changed at any time according to the interests of the country, without this change having to have been previously approved by the National Congress.

What is the IOF for?

In addition to the initial purpose of raising funds, the IOF also functions as a regulatory tool for the economy. Through its collection, the government is able to know more precisely how the conditions of supply and demand for credit in the country are in order to be able to act when necessary.

In addition, it is the Federal Executive Branch that has full control over IOF regulation. Therefore, it can be changed at any time without having to pass approval by the National Congress. This facilitates government action to increase or decrease the tax burden in the economy at will.

How does IOF work?

The collection and payment of the IOF takes place directly at the source. The person responsible for collecting the tax is the institution that carries out the financial transaction – that is, banks, financial institutions, foreign exchange companies, insurance companies or any other legal entity that acts in the purchase and sale of bonds or securities.

It is an indirect tax and considered as non-transferable, as it affects each transaction and does not depend on a declaration to be collected. The rate normally charged for transactions is 0.38%, plus a daily rate that varies according to the type of transaction.

Is IOF really necessary?

As Brazilians are burdened by an immense tax burden, doubts about the real need for any extra contribution are quite common. Given this context, the IOF may seem controversial, and the fact is that, despite the important role in the country’s economic stability, experts say that its result is not as expected.

In addition to focusing on extremely important areas of our domestic market, a large part of consumers end up not being affected by taxation, as there are various alternatives to escape it, such as purchases made with interest-free installments or adhesion to exclusive cards of commercial establishments.

How is the IOF calculated for real estate financing?

Financing for residential properties is exempt from the IOF charge. However, this is not suitable for any type of purchase. Legal entities need to pay the contribution, and this exemption applies only to purchases made by individuals and only applies to housing units.

Other types of operations that can also serve as real estate financing, such as real estate leasing, are also exempt from the IOF charge because they are not considered “financial” operations in fact. In practical terms, leasing is also a way of financing in the medium or long term.

In general, we can understand leasing as a continuous investment for the acquisition of real estate, in which the client who rents settles a monthly amount before the owner and, after paying off the total credit, has the option of definitively acquiring the property.

For commercial properties and/or financed by companies, the IOF is always charged and its rate is calculated as follows:

  • Financing contracted until 01/21/2015: 0.38% per year + daily rate of 0.0041% (or 1.5% per year) = 1.88% per year.
  • Financing contracted from 01/22/2015: 0.38% per year + daily rate of 0.0082% (or 3% per year) = 3.38% per year.

In both cases, the tax amount is calculated at the time the credit is released and is based on the term of the transaction and the value of the property.

What other modalities have IOF incidence?

Credit card

As we said, there are ways to not pay the IOF, and the credit card is one of them. With it, there is no impact of the contribution, both for cash purchases and for installments. However, if you fail to pay the invoice for the month, things change, as this is seen as if your operator is giving you credit.

In this situation, the entire amount that is no longer paid is taxed according to the rate applied to loans, which is 0.38% + 0.0082% per day, for individuals. There is a ceiling for this charge, which is 3%, and relating to 365 days. It is worth remembering that for transactions abroad, an IOF of 6.38% is charged.


There is an impact of the IOF on life and personal accident insurance, even when these are mandatory, which causes considerable controversy among specialists. In these cases, the tax rate is 0.38% on the policy premium. In other modalities, such as vehicle insurance, an IOF of 7.38% is charged.


The exchange rate also suffers from the impact of the IOF, and there are two different rates in the case of negotiations with foreign currency. For currency purchase, sending and receiving amounts from abroad, the percentage is 0.38%. For transactions made with credit, debit and prepaid cards abroad, the rate is 6.38%.

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