Enacted at the end of last year, the new Legal Framework of the Foreign Exchange Market, legal framework introduced by Law No. 14,286 2021, in to became effective this year (2022). Under the new legal framework, banks and often financial institutions will be able to invest overseas funds raised in Brazil or abroad, in addition to facilitating the use of Brazilian currency in international transactions.
The norm also increased the limit of the cash amount each passenger can carry when entering or leaving Brazil. Instead of the current limit of BRL10,000.00, the new amount will be of USD10,000.00 or the equivalent in another currency. Small-value negotiations between individuals will also be allowed, limited to USD500.00.
Besides these changes, the new understanding influenced the adoption of new measures to facilitate financial transactions between countries, such as the publication of Decree No. 10,997/2022 on 16th March 2022, which will bring the rates of IOF-Forex (Tax on Financial Transactions involving foreign exchange transactions) to zero by January 2029.
This reduction will occur in a gradual way until reaching the zero-tax rate on all foreign exchange transactions by the year 2029. The reduction started on 19th March 2022, and the zero-tax rate is already applicable to foreign loan transactions with a minimum average repayment term of up to 180 days. In addition, transactions involving the use of credit cards abroad will have the IOF reduced according to the following schedule:
- From 6.38% to 5.38%, as from 2nd January 2023;
- 4.38%, as from 2nd January 2024;
- 3.38%, as from 2nd January 2025;
- 2.38%, as from 2nd January 2026;
- 1.38%, as from 1st January 2027;
- Zero, as from 2nd January 2028.
The measure is part of the movement to adhere to the Codes for Liberalization of Capital Movements and Invisible Transactions, essential for Brazil to join the Organization for Economic Cooperation and Development (OECD).