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Discover What IOF Is, How It Affects Credit Cards, Loans, Currency Exchange, and Investments, and See How Much the Government Collects from This Tax!
International credit card, loan, currency exchange… Have you ever seen an extra charge and wondered where it came from? It was probably the feared IOF — the Tax on Financial Transactions. It is present in various daily transactions, and few people know exactly what it is for.
Although often invisible, it moves billions every year into public coffers. Understanding this tax can help you better understand how your money circulates. Below are some curious facts, numbers, and practical uses of IOF in Brazil.
Origin and Meaning of IOF
IOF was introduced in 1966 as a way for the government to monitor and collect on financial operations. The acronym stands for Tax on Financial Transactions, and it applies to credit, currency exchange, insurance, and investments. It is a federal tax, meaning all the revenue collected goes directly to the Union.
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Credit Card
Purchases made with an international card incur a 4.38% IOF charge on the total amount. Even for online purchases from foreign sites, the tax is already included in the invoice. This is one of the most common ways this tax appears in the day-to-day life of consumers.
Loans and Financing
When taking out a personal or payroll loan, the IOF is also automatically charged. The rate varies, potentially reaching 3% per year + 0.0082% per day. The amount depends on the type of operation and the duration of the contract.
IOF on Currency Exchange and Travel
When purchasing dollars, euros, or other foreign currencies, the IOF is also present. The current rate is 1.1% for cash and 4.38% for international prepaid cards. This directly influences the cost of trips abroad or sending money out of the country.
Financial Investments and Investments
The IOF can also apply to short-term investments, such as CDBs and funds. If you withdraw the amount before 30 days, there is a regressive IOF charge. After this period, the tax no longer applies to the returns.
How Much the Government Collects from IOF
According to data from the Federal Revenue, Brazil collected more than R$ 50 billion from IOF in 2023. This amount represents an important source of federal revenue, used in various areas of the public budget. The collection varies according to the volume of credit, consumption, and currency exchange operations in the country.
