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The decree reduces the foreign transaction tax from 6.38% to 0% by 2029 for certain settlements of foreign exchange currency. The gradual reduction in the foreign transaction tax represents a step towards Brazil becoming a member of the OECD countries.

On March 16, 2022, Brazil's Executive Branch published Presidential Decree 10.997/2022, reducing the Brazilian financial transaction tax (IOF-FX) due on the settlement of foreign exchange currency (FX). This change is part of Brazil's efforts to join the OECD.

Currently, the IOF-FX is levied at rates ranging from 0% to 6.38% on the gross amount of foreign currency transferred to or from Brazil, depending on the nature of the FX transaction (certain transactions are exempt from IOF-FX).

Decree 10.997 will gradually reduce the IOF-FX rates on all eligible FX settlements to 0% by 2029, as follows:

• Within three days of publishing the decree (March 19, 2022), the IOF-FX will decrease from 6% to 0% on the settlement of FX related to the currency inflow from short-term loans to Brazilian borrowers.
• Beginning January 2, 2023, the IOF-FX will decrease by one percentage point each year on the settlement of FX related to the currency outflows for international credit, debit, prepaid card and traveler check transactions (getting from 6.38% to 0% by January 2, 2028).
• Beginning on January 2, 2028, the IOF-FX will decrease from 1.1% to 0% on the currency outflows for acquiring foreign cash or transferring to an account abroad with the same accountholder's name.
• Beginning on January 2, 2029, the IOF-FX will decrease from 0.38% to 0% on all other currency inflows to and outflows from Brazil.

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