Brazil: Congress Receives Provisional Measure to Offset IOF Tax Reduction

Brazil – June 13, 2025 – www.zonadeazar.com The Executive Branch has sent a provisional measure to the National Congress to standardize taxation on banking investments. The measure was published on Wednesday (11) in a special edition of the Official Gazette and must be voted on by senators and representatives by August 28. The government expects to raise R$ 10.5 billion in 2025 and R$ 20.6 billion in 2026 through the changes.

Provisional Measure (MP) 1.303/2025 was issued to offset the revocation of President Luiz Inácio Lula da Silva’s decree that would have increased the Financial Operations Tax (IOF). Alternative solutions to the IOF hike were discussed on Sunday (8) by Finance Minister Fernando Haddad and the Presidents of the Senate and House, Davi Alcolumbre and Hugo Motta, after Congress opposed the decree.

The new MP imposes income tax on new issuances of currently exempt securities, such as Agricultural Credit Bills (LCA), Real Estate Credit Bills (LCI), CRI, CRA, and incentivized debentures. The rate is 5%.

For other securities already subject to income tax, the Executive proposes a “tax harmonization.” Regardless of the investment period, the tax rate is set at 17.5%. The same rate will apply to crypto assets, which will no longer be exempt on operations up to R$ 35,000. According to the Ministry of Finance, savings accounts remain tax-exempt.

MP 1.303/2025 also addresses the Social Contribution on Net Profit (CSLL) paid by financial institutions. The previous rates were 9%, 15%, and 20%. The new measure eliminates the lowest tier.

Insurance companies, payment institutions, currency exchanges, and mortgage credit companies will pay a 15% CSLL. Banks and credit, financing, and investment companies will be taxed at 20%.

According to the Ministry of Finance, the goal of the MP is to “correct distortions, ensure tax equity, and maintain Brazil’s fiscal balance.”

The measure will first be analyzed by a joint congressional committee, yet to be appointed, and then voted on in both the House and Senate plenaries.

Sports Betting
The provisional measure also increases the tax burden on sports betting. The tax rate on betting revenue rises from 12% to 18%.

The rate does not apply to prizes paid to bettors but rather to the Gross Gaming Revenue (GGR), which is the difference between total bets and total prizes and taxes paid.

Tax Credit Compensation
Other provisions in MP 1.303/2025 aim to curb abusive tax credit compensations. It defines as invalid any declaration involving non-existent payment documents or PIS/Cofins credits unrelated to the taxpayer’s economic activity.

Public Spending
According to the Ministry of Finance, the MP includes adjustments to public spending to strengthen the fiscal framework. Among the measures is the inclusion of the “Pé-de-Meia” Program in the constitutional education funding floor.

It also limits sickness benefits to a maximum of 30 days when granted without a medical exam and restricts spending on the closed season insurance for artisanal fishermen to the budget defined at the start of the year.

IOF
President Lula issued a new decree on Wednesday to recalibrate IOF rates. The fixed rate for credit to legal entities drops from 0.95% to 0.38%. The IOF on the so-called “assigned risk” credit operation will no longer have a fixed rate, only a daily one of 0.0082%.

Agência Senado (Reproduction authorized with credit to Agência Senado)
Source: Agência Senado

Edited by: @_fonta www.zonadeazar.com