International Tax Newsletter - June 2025

Senate overturns decrees on IOF increase 

On the evening of June 25, the Senate approved Legislative Decree Bill (PDL) 214/2025, which suspends the effects of three federal government decrees that increased the rates of the Tax on Financial Transactions (IOF). The measure had already been approved hours earlier by the Chamber of Deputies and is now awaiting enactment.

In May, two decrees (12,466/2025 and 12,467/2025) issued by the government increased the IOF for several financial transactions. Due to the negative reaction of some productive sectors, the Planalto Palace withdrew part of the increases, issuing a new decree (12,499/2025). However, this government position was not enough to reverse the criticism from economic agents and members of Congress.

The PDL covers transactions such as loans, financing, use of credit cards and international remittances, and reinstates the validity of decree No. 6,306/2007, which regulated the IOF until then. The initiative represents a significant defeat for the Planalto Palace, which sought to increase revenue to compensate for measures to exempt Income Tax.

The reinstated decree also defines the applicable rates for each type of transaction. For example: in credit transactions, the rate varies according to the term and type of transaction; in foreign exchange transactions, the rate is generally 0.38%, but may be higher or lower, depending on the purpose of the transaction. The decree also lists several situations where IOF is exempt, such as foreign exchange transactions linked to exports; life insurance transactions; and some transactions with international organizations.

With the approval of the PDL, the fiscal scenario becomes more complicated for the government, which will have to seek alternatives to balance the budget and meet fiscal targets, respecting the limits imposed by the National Congress.

Government confirms 17.5% tax on investment income, among other changes 

MP (Provisional Measure) No. 1,303/2025 introduced significant changes to the tax regime: it raised the IRRF (WTH) on Interest on Equity to 20%, established a new rate of 17.5% (which could reach 25%) for non-resident investors and increased the CSLL (Social Contribution) of financial institutions, reaching 20%.

The new Provisional Measure increased the Income Tax Withheld at Source (IRRF) rate on Interest on Equity (JCP), from 15% to 20%. The Provisional Measure established a new general rate of 17.5% of IRRF on income from financial investments earned by non-residents, which may reach 25% in the case of investors located in jurisdictions with favorable taxation.

The Provisional Measure also brought significant changes to the Social Contribution on Net Income (CSLL) for financial institutions, with the creation of new bands and important reclassifications.

Additionally, Provisional Measure No. 1,303 of June 11, 2025, expands the cases in which tax offsets are considered undeclared, meaning that debts are not extinguished and subjecting the taxpayer to penalties and immediate collection (art. 78 of IN 2055/21). These cases involve offsets with credits (i) derived from undue payment without a valid collection document and (ii) from the non-cumulative PIS/Pasep or COFINS regime that are not related to the taxpayer's economic activity.

Among other changes, the Provisional measure also brought:

• Increase in the taxation of revenues from bets (sports betting companies) from 12% to 18%;

• End of the Income Tax exemption on securities such as Real Estate Credit Letters (LCI), Agricultural Credit Letters (LCA), Real Estate Receivables Certificates (CRI) and Agribusiness Receivables Certificates (CRA), which will now pay 5%.

• Elimination of the exemption for sales with capital gains of up to R$35 thousand per month for virtual assets (cryptocurrencies)

Betting tax increase to come into effect in October 2025

The Ministry of Finance announced that the new 18% tax rate on revenue from sports betting will be applied as of October 1, 2025. The date was set in accordance with the ninety-day rule, which requires a minimum interval of 90 days between the publication of the rule and the start of the tax collection.

The change was announced on the evening of June 12 and is provided for in the Provisional Measure (MP) that presented alternatives to the decree that increased the Tax on Financial Transactions (IOF).

The new tax rate will be levied on Gross Gaming Revenue (GGR), which corresponds to the gross revenue of bookmakers. This amount is calculated based on the total amount collected from bets, minus the amount paid to bettors as a prize.

Currently, the tax rate on GGR from bets is 12%. With the change, the percentage will increase to 18%, increasing the tax burden on platforms operating in the Brazilian sports betting market.

The Provisional Measure that includes the increase in the betting tax rate is already in force, but it needs to be approved by the National Congress within 120 days to become definitive. The government must intensify negotiations with parliamentarians to ensure the approval of the proposal within the legal deadline.

Import Tax (I.I.) increases are published

Gecex/Camex Resolution No. 740 was published in the Official Gazette of June 24, 2025, to address changes in Annex IX of the TEC - List of tariff increases, due to trade imbalances arising from the international economic situation.

The change in the aforementioned list, known as the DCC List, was expected since it was disclosed in the Deliberations of the 2nd Extraordinary Meeting of 2025 of Gecex at the end of May.

In fact, on the same date, Secex Ordinance No. 405 was published, establishing the criteria for allocating the quotas established for the products included in Gecex/Camex Resolution No. 740/2025. Products that had increases in their Import Tax rates will have the quotas granted in subperiods; and the remaining balance of unused quotas, as well as reversals, will not be added to quotas from the subsequent subperiod.

Please note that the increase will not be applied to items imported within the established quota, such as flat rolled products, when simply hot rolled, in rolls, classified under NCM 7225.30.00, whose I.I. rate in the DCC List will be 25%. Within the quota of 29,395,937 kilos, the I.I. rate will be maintained at 12.6%. The measure will be valid for 12 months. In addition, some products will have their rate increased without applying a quota.

It is worth remembering that Decrees No. 11,894/2024 and 11,895/2024 incorporated into the Brazilian legal system the Mercosur instrument related to "Specific Actions in the Tariff Scope for Reasons of Trade Imbalances Derived from the International Economic Situation".

This instrument allows Mercosur member countries to temporarily increase, above the Common External Tariff (CET), the Import Tax rates for extra-zone imports originating outside the bloc. However, the tariff ceiling of the GATT/WTO agreement must be observed and cannot be exceeded.

According to the additional protocol that is part of Decree No. 11,894/2024, the term of the mechanism that allows the increase of the Import Tax due to trade imbalances is valid until December 31, 2028.

Gecex/Camex Resolution No. 740 and Secex Ordinance No. 405 come into force on the date of their publication, that is, June 24, 2025.

Congress overturns veto and frees FIIs and Fiagros from new taxes in the tax reform

The National Congress overturned the veto that removed the exemption of real estate investment funds (FIIs) and agribusiness investment funds (Fiagros) from the new taxes created by the Consumption Tax Reform. With the decision, FIIs and Fiagros will not be subject to the Tax on Goods and Services (IBS) – a state and municipal tax – nor to the Contribution on Goods and Services (CBS) – a federal tax.

The vote took place in a joint session of the Chamber of Deputies and the Federal Senate and was organized mainly by members of the Parliamentary Front for Agriculture. The assessment of these members of Congress is that taxing the funds would negatively impact access to credit in the rural sector and reduce the attractiveness of investments in real estate funds.

With this definition, Congress signals that it intends to preserve strategic financial instruments from the incidence of IBS and CBS, ensuring predictability and competitiveness in segments such as the real estate market, rural credit and equity funds.

New taxes on cryptocurrencies: Single rate and end of exemption of up to R$35 thousand per month 

The federal government published decree No. 12,499 and Provisional Measure (MP) No. 1,303, which change the taxation of the Tax on Financial Transactions (IOF) and the cryptocurrency and digital asset market.

Starting with the decree, it barely addresses the taxation of digital assets, but it does open up space for taxation on stablecoins. You can read more about the subject here or at the end of this report.

The MP, on the other hand, makes more profound changes to the Personal Income Tax (IRPF), as it unified the total rate at 17.5% and eliminated the exemption for sales with capital gains of up to R$35,000 per month for virtual assets (cryptocurrencies), in addition to introducing other relevant changes to the sector. The rules continue to exist for real estate and other movable property.

Finally, it is worth mentioning that the changes proposed by the government were made through a provisional measure, which depends on approval by the National Congress to be converted into law and become applicable over time.

Federal Revenue begins testing of CBS that will replace PIS and Cofins

The Federal Revenue Service published Ordinance RFB No. 549, which establishes a pilot project to test the Contribution on Goods and Services (CBS), a new tax that will replace the Social Integration Program (PIS), the Contribution for the Financing of Social Security (Cofins) and part of the Tax on Industrialized Products (IPI) starting in 2026. The initiative marks the beginning of the practical phase of the implementation of the tax reform approved in 2023.

The project is experimental in nature, with no costs for participating companies and without generating real tax obligations. The objective is to adjust the technological and operational systems of the Revenue Service before the CBS comes into effect.

Participation in the pilot project will be done exclusively by invitation from the Federal Revenue Service, which will publish the list of selected companies in the Official Gazette of the Union.

Companies that already have a prior relationship with the Revenue Service, such as those that are part of the Confia Program or the Public Digital Accounting System (SPED), will be eligible, in addition to companies indicated by the Goods and Services Tax Management Committee (IBS). Companies from the technology sector and representatives of economic segments linked to confederations or sectoral associations may also participate.

According to the Federal Revenue Service, the CBS pilot project has the following main focus:

• Conducting operational and technological tests of the new assessment system;
• Simulating the calculation and accounting of the CBS in a non-binding manner;
• Identifying any adjustments required before official implementation;
• Preparing the digital environment and taxpayers for the start of the new taxation.

The Revenue Service clarifies that participation in the pilot does not create real tax obligations and does not involve payment of taxes.

The tax reform approved in 2023 established a staggered schedule for the implementation of the CBS and IBS. The CBS will replace the PIS and Cofins, and the IBS will unify the ICMS and ISS.

The transition schedule will be divided into stages:

• 2026: start of the experimental collection of the CBS (rate of 0.9%) and the IBS (0.1%);
• 2027: extinction of the PIS and Cofins, and application of the full CBS rate, which is yet to be defined by the government;
• 2029 to 2032: gradual reduction of the ICMS and ISS, with progressive growth of the IBS;
• 2033: unified consumption tax system comes into full operation.

The CBS will be one of the pillars of the new system, which seeks to simplify the collection of consumption taxes, reduce bureaucracy and harmonize tax legislation in the country.