IOF: What It Is, When It’s Paid, and How It’s Calculated

This article will cover these topics in detail, providing practical examples and tips on avoiding or reducing the impact of this tax on certain transactions.

If you have questions about trading in general, our courses for new traders will answer many of them.

What is the IOF?

The IOF (Portuguese acronym for Financial Transactions Tax) was introduced in Brazil as a means of controlling the financial markets, serving as an essential tool in the government’s monetary policy. The tax is levied on transactions such as loans, foreign exchange, insurance, and even investments. In addition to its regulatory role, the IOF also contributes significantly to the government’s tax revenue.

In practice, the IOF affects both individuals and companies. It is levied on everyday transactions, such as buying foreign currency for trips abroad, and also on more complex operations like investment withdrawals.

Thus, for all Brazilians, it is essential to understand how the IOF varies in its wide-ranging applicability in order to avoid unpleasant surprises and to reduce its burden whenever possible on their personal finances.

Are IOF and interest the same thing?

A frequent question among Brazilians is whether the IOF and interest are the same thing, since both are usually found in credit transaction reports. The answer is no. Interest refers to the cost of lending money, i.e., compensation to the issuing financial institution for offering credit.

Whereas, the IOF is a tax levied by the government on such a transaction. Unlike interest, which depends on the issuing financial institution and the type of credit operation performed, IOF rates are set by the federal government, and its applicability is standardized across financial transactions.

For instance, when you take out a loan, you pay interest to the financial institution, and the IOF to the government. This is an important distinction, as the IOF may significantly increase the transaction’s final cost in many cases.

When is the IOF paid?

The IOF is levied on a wide group of financial transactions, encompassing credit operations, foreign exchange, insurance, and investment withdrawal. When IOF is paid is determined by the transaction type. In loans, for example, the tax is paid when the loan amount is credited to the borrower. In foreign exchange transactions, it is paid when foreign currency is bought or sold.

Here are the more common examples of IOF applicability:

• Loans and financing, including personal and payroll-deducted loans;

• International credit/debit card transactions;

• Buying and selling foreign currency;

• Taking out insurance;

• Withdrawing investments of certain types.

International money transfers: IOF for same-owner vs. different-owner remittances

One of the most common uses of foreign exchange is sending or receiving money across borders. The IOF rate depends on whether the transfer is between accounts owned by the same person or from one’s account to someone else’s :

• Same-owner transfers abroad (remitting money to yourself): The IOF is 3.5%. This applies when you move funds between accounts under your name, for example, sending money from your Brazilian account to your own account overseas.

• Different-owner transfers (remitting to someone else): The IOF is 0.38%. This applies when you send money abroad to another individual or company, or when you receive funds in Brazil from someone else.

These differences matter if you deal with international remittances. Planning ahead can reduce the tax cost depending on the purpose of the transfer.

What is the IOF rate and how is it calculated?

The IOF rate varies among different types of financial transactions. Here’s a breakdown of how it’s calculated in different situations and how it affects transactions.

Credit transactions

• Individuals pay 0.38% (fixed) + 0.0082% per day.

• Companies pay 0.38% (fixed) + 0.0041% per day.

In the above example, the loan would include a total of BRL 340.80 in IOF tax.

International credit/debit card transactions

The IOF rate for international transactions made by credit or debit card is 3.5%.That means if you buy BRL 1000.00 in foreign currency, you will be charged an additional BRL 35.00 in IOF tax.

It is important to note that the 3.5% IOF rate applies even if you acquire a prepaid card in foreign currency.

Timeline for the phasing out of IOF (cards and FX)

The Brazilian government is gradually getting rid of the IOF on international card transactions and eventually on all FX operations. Here’s the official schedule:

In addition to the card reduction schedule, the government has announced plans to end the IOF on all foreign exchange operations by 2029.

Foreign exchange transactions

Foreign exchange transactions are also subject to the IOF. The rate varies depending on the transaction type. When buying foreign currency in cash, the applicable rate is 3.5%, considering its recent increase.

As mentioned above, the IOF rate for payment card transactions is 3.5%. This varying tax rate makes financial planning very important in international travel, as the IOF can significantly affect the cost of the trip, depending on how the money is obtained or used abroad.

Insurance

The IOF on insurance varies according to the type of policy and whether you are paying premiums or receiving benefits.

It’s important to remember that these are the current figures. They may be subject to change in accordance with the VAT tax proposal included in the ongoing Brazilian tax reforms.

The IOF applies differently depending on the insurance policy type and on whether you are paying premiums or receiving benefits.

Exemptions:

• No IOF is charged on mortgage-related insurance linked to housing finance.

• Some social or government-mandated policies may qualify for reduced or zero IOF rates.

Practical example: If you pay BRL 1000 for a car insurance premium at 7.38%, the IOF is BRL 73.80. If you later receive a BRL 5000 claim payout, the IOF is BRL 19.00 (0.38%).

Investment withdrawal

The IOF may also be levied on investment withdrawals, especially when they happen less than 30 days after the investment is made. In that event, the IOF is levied on the earnings at a rate of 96% on the first day, gradually decreasing to 0% by the end of the 30-day period. The values for each day are shown in the table below:

The applicable rate diminishes gradually with time (in Brazil, this is known as “tabela regressiva”). The aim is to discourage early withdrawal of short-term investments. For example, if you withdraw the investment after 15 days, you will pay a 50% IOF rate on the earnings up to that date.

The IOF applies differently depending on the type of operation. Here’s a breakdown:

There are ways to invest without paying IOF tax. Investments such as equity funds, certain alternative assets, and cryptocurrency are exempt from the IOF. So it is possible to invest in Brazil and avoid getting involved with the tabela regressiva.

How is my IOF calculated?

The IOF is always charged as a percentage of the transaction amount in Brazilian reais (BRL). Let’s look at the main cases and how the math works.

1. Credit card purchases abroad

2. Buying foreign currency in cash

3. International wire transfers (different owner)

How to check the IOF on your statements

It’s important to confirm how much IOF you’ve actually been charged. On most bank and credit card statements, the tax appears explicitly with the acronym “IOF” followed by the tax amount.

• Bank transfers and remittances: The IOF usually appears right under the transfer amount as a separate debit.

• Credit card purchases: On international transactions, the IOF is listed a separate charge under the purchase in foreign currency. It is displayed in the BRL equivalent.

• Loans and financing: The IOF is usually charged when the loan money is paid out. It’s often listed separately from “interest.”

Tip: If you notice an unfamiliar charge in small print on your statement, look for the acronym “IOF.” That is the government tax, not a bank fee.

Example:

• You buy something abroad forUSD 100.00, which converts to BRL 500.00.

• The IOF is (3.5%) of that amount, or BRL 17.5.

• The total amount charged is BRL 517.50.

How to minimize your IOF

Although the IOF is a mandatory tax, there are ways to minimize it, or even avoid it altogether, depending on the type of transaction. Here are some tips:

1. Choose the right payment method abroad

• Using a credit card for international purchases triggers the highest IOF (currently 3.5%).

• A debit card linked to a foreign account or a prepaid card topped up abroad can be cheaper.

• Buying foreign currency in cash before traveling is often cheaper (3.5% IOF).

2. Plan international transfers carefully

• Sending money to another person or company is taxed at 0.38%, while sending to your own account abroad costs 3.5%.

• When possible, structure transfers so that they fall under the 0.38% category.

• Compare banks and money transfer services: some platforms offer better exchange rates or lower fees that offset the IOF.

3. Pick IOF-exempt investments

• Some securities, like equity funds, stocks, and certain alternative assets, are exempt.

• Holding investments for more than 30 days avoids the regressive IOF on early withdrawals.

4. Use both cards and cash when traveling

• Relying only on a credit card abroad can make trips significantly more expensive.

• A smarter approach is to carry some of your money in cash (1.1% IOF) and use debit or transfers instead of credit whenever possible.

5. Keep an eye on reforms

• Brazil plans to phase out the IOF on foreign exchange by 2029. Staying informed can help you plan and save money.

IOF scenario examples

1. The traveler Maria hasBRL 10 000 saved up for her trip to Europe.

• If she puts it all on her credit card, she will pay an IOF of 3.5%, or BRL 350.

• If she buys cash at an exchange office, she will pay an IOF of 1.1%, or BRL 110.

• If she does both (BRL 5000 in cash + BRL 5000 card), her IOF total is BRL 274.

2. The borrower João takes a BRL 20 000 personal loan for 12 months. The IOF is calculated like this:

• Fixed IOF: 0.38% — BRL 76.

• Daily IOF: 0.0082% × 365 days × BRL 20,000 ≈ BRL 598.

• Total IOF ≈ BRL 674 + interest.

Even before bank interest, the IOF adds up significantly. Comparing loan options is essential.

3. The investor Ana invests BRL 50 000 in a fixed-income fund.

• If she withdraws her money after 10 days, theIOF on earnings is 66% of returns. If she earned BRL 500, her IOF is BRL 330.

• If she waits 31 days, her IOF will be 0.

You pay zero IOF on money invested for more than 30 days.

What is the impact of the IOF on loans?

The IOF can have a significant impact on the final cost of loan transactions. In long-term transactions, the 0.0082% daily rate (for individuals) can account for a considerable total cost by the end of the contract in addition to the 0.38% fixed rate.

For consumers, to add to the interest charged by financial institutions, the IOF can increase the total amount to be paid for obtaining credit. This is one of the reasons you should compare the conditions offered on different credit types and check if there are lower-cost alternatives, such as IOF-exempt credit or lower-interest loans (where lower interest compensates IOF charges).

Is IOF exemption a possibility?

Brazil is gradually reducing IOF rates, but the timeline of those reductions depends on the type of transaction:

• For international card payments (credit, debit, prepaid), the government has set up a yearly reduction schedule. The tax will fall to 0% by January 2, 2028.

• For foreign exchange transactions in general (cash, wires, investments), a broader plan aims to eliminate the IOF completely by 2029.

These are two separate measures. One applies only to card payments abroad. The other applies to all foreign exchange operations. Both were formalized in the Diário Oficial da União (the Federal Official Gazette) on July 29, 2022.

IOF rate schedule

To better understand how IOF rates work, check out the table below. It shows the main rates applicable to the various financial transactions covered in this article:

IOF quick-reference table

Legal basis and updates

• The IOF rules and reduction schedule were made official in the Diário Oficial da União on July 29, 2022, and then on subsequent updates.

• Rates in this article reflect the latest government guidance available as of September 18, 2025.

• For official references, see Ministry of Finance publications and Federal Revenue Service (Receita Federal) communications.

Key terms

IOF (Imposto sobre Operações Financeiras): Brazil’s tax on financial operations. This applies to credit, loans, insurance, investments, foreign exchange, and international transfers.

Same-ownership remittance: An international money transfer between accounts under the same name (e.g., your Brazilian account to your own account abroad). Taxed at 3.5%, higher than transfers to third parties.

Different-ownership remittance: An international money transfer between accounts under different names (e.g., paying someone abroad). Taxed at 0.38%.

Tabela regressiva do IOF: The regressive IOF schedule on investment withdrawals for the first 30 days. It starts at 96% of earnings for the first day, and decreases every day until it reaches 0% after day 30.

CET (Custo Efetivo Total): The “Total Effective Cost” of a loan or financing, which includes interest, fees, insurance, and IOF. This metric shows the real cost of borrowing.

FAQ

In which cases is the IOF levied on financial transactions?

The IOF is levied on various transactions, including loans, international purchases, foreign exchange, insurance, and investment withdrawal. The tax is levied at specific moments, such as when credit is granted or when foreign currency is purchased.

How is the IOF computed on credit transactions?

IOF computation on credit transactions includes a 0.95% fixed rate on the total value of the contract, in addition to a daily rate that depends on the duration of the contract. The daily rate is 0.0082% for individuals and 0.0041% for companies.

Is IOF exemption a possibility?

Yes. IOF exemption applies to certain situations, such as car loans or affordable housing loans. In addition, IOF is not levied on investments lasting more than 30 days, as the rate for any period longer than this is 0%.