Three letters and one tax: Understand at once what IOF is and know what has changed with the latest measures taken by the government.

The financial operations tax is something you have probably found on an invoice or at least heard. Now it's time to understand everything about the topic and not perform more operations, not knowing that you are paying for it.

In this post we will talk about:

• What is IOF
• What are the financial operations that have the tax
• When it is accounted for credit card
• How much does IOF cost
• What changed in the tax with the Covid-19 pandemic

Let's go together?

What is IOF?

The financial operations tax was created by the government, with the objective of regulating the national economy. Therefore, this tax is not determined by banks or card operators as many people think.

It was created there in 1988 and it is worth talking that this tax is paid for both individuals and legal entities (yes, companies also pay IOF about their financial operations!).

What financial operations have IOF?

There are many financial operations involving this charge, especially those linked to:

→ Exchange: Buy or sell coins from other countries;

→ Insurance: Here comes life insurance, cars and goods in general.

→ Real estate titles

→ Credit

Emphasis on the last item of our list, when we talk about credit operations, we have to think of modalities such as:

• Personal Loan- Here you should always keep an eye on the amount of the Total Effective Cost (CET) as it indicates all the charges of credit operations, such as rates, interest rates and IOF itself.
• Special Check: In addition to the high interest rates, which we talk about in this article, entering overdraft also means paying IOF.
• Credit Card: As it is the biggest cause of debts in individuals in Brazil, we find it fair to make a topic only about cases where IOF is applied!

See following:

When is IOF accounted for credit card?

Not every time your credit card is used, the tax will be charged. There are specific situations for this, they are:

• International Purchases : And here it is worth remembering that you do not need to be traveling for it! Purchases made on the Internet on foreign sites are more than enough to charge. Purchases made with the credit card within Brazil, in Real, do not pay IOF.
• Installing the card bill or making only the payment considering minimal, is to play a part of the amount for the following month's invoice, in the financial world this is known as entering the rotary. In these cases, in addition to the most aggressive interest on the market, you will also pay IOF.
• Delays in payment of the invoice also apply.

How much does IOF cost?

The amount you will pay for the tax depends on what was the financial operation performed.

Here we will give some examples of percentages about some of the main operations:

% International Card Purchases: 6.38% IOF on purchases made abroad with credit or prepaid card (which as well as mobile, you add credit before using it).

%Purchase and sale of foreign currency: the exchange rate we spoke at the beginning of this text, has a rate of 1.1%.

% Or rotary check: In both cases the percentage charged is the same: 0.38% of the amount that is overdue and more 0.0082% per day the amount is late.

Remembering that we are just talking about IOF! Other than that, there are still interest rates, so these debts should be paid off as soon as possible.

In either case, the accumulated daily IOF cannot exceed 3% - regardless of the amount of days the debt run.

%Loan: 0.38%on the loan amount, plus a daily percentage of 0.0082%, calculated according to the total period provided for payment.

What has changed in IOF with the covid-19 pandemic?

In addition to the measures already taken by the government, such as release of emergency aid, new FGTS withdrawal and IR extension, the of IOF zero

At first, this will be valid until June 2020 , but may be extended if the government deems it necessary.

What changes in practice?

If you already have ongoing loans, they should weigh less in your monthly budget, as future installments will come without the value of the added tax. The same goes for signings made within this period.

Remember that evaluating your financial planning is essential before performing a financial operation, even with the reduction of IOF.

Enjoy to know us better!