Brazil’s new finance minister, Dario Durigan, is expected to delay public consultations on imposing a financial business tax, known locally as the Imposto sobre Operações Financeiras (IOF), on certain cryptocurrency transactions, Reuters reported, citing people familiar with the matter.
Dulligan took office on March 20 after Fernando Haddad resigned to run for governor of São Paulo. Reuters said the new minister hopes to focus on microeconomic measures and avoid proposals that may trigger conflicts with Congress in an election year.
The postponed consultations center on a draft decree that could classify certain cryptocurrency transactions as foreign exchange operations.
This is important because foreign exchange transactions in Brazil can face IOF rates, ranging from 0.38% for certain inbound flows to as high as 3.5% for overseas purchases, remittances and foreign card purchases. Overseas investment transfers may face a tax rate of 1.1%.
The proposal has already faced opposition from major industry groups. ABcripto, ABFintechs, Abracam, ABToken and Zetta (representing more than 850 companies in total) said in a joint statement that applying IOF to stablecoin transactions is illegal under the Brazilian Constitution and the country’s 2022 Virtual Assets Law.
They believe that stablecoins are not legal tender and cannot be treated as foreign exchange instruments through statute or administrative rules.
The proposal attracted attention in February after the central bank brought parts of the cryptocurrency market, particularly some stablecoin activities, into the scope of foreign exchange rules. This provides a basis for the Ministry of Finance and tax authorities to study whether these transactions should be classified as IOF.
The department may also shelve a separate proposal to end tax breaks on certain investment securities.
