The Brazilian Federal Revenue Service published Consultation Solution 246, on December 24, 2018, establishing an understanding on the incidence of IOF foreign exchange (0.38% rate) on transactions involving the return to Brazil of funds arising from exports.
The agency maintains that "upon receipt of the funds in an account held abroad, the export cycle ends [so that] if at a date subsequent to the deposit the exporter decides to remit the funds to Brazil, this remittance of currency will not be part of the export process and will be subject to the 0.38% rate.
Pursuant to this understanding, financial institutions (in the capacity of tax payers) have been discounting the IOF Exchange upon the execution of such financial transactions.
But the requirement of IOF Exchange on export revenues is absolutely illegal: art. 15 B of Decree 6.306/2007 provides that "in exchange operations related to the entry into the country of export revenues from goods and services" the tax is "zero", without any proviso regarding the "export cycle" referred to by RFB.
In view of this illegality, exporting companies may file a lawsuit aiming at eliminating the requirement of IOF on financial transactions involving the return to Brazil of funds resulting from exports, with good chances of success, especially because the Judiciary has been sensitive to the taxpayers' plea.
Our Tax Team is entirely available to clarify any questions on this matter.
Eduardo Zangerolami([email protected]) and Katia Gutierres([email protected])
