International Tax Newsletter - Maio 2025

Federal Government changes IOF rules

On May 22nd, 2025, the Brazilian Government published Decree #12,466, which introduced significant changes to the regulation of the Tax on Credit, Exchange and Insurance Transactions, or those related to Securities or Financial Instruments – IOF, increasing the rates for various credit, exchange and insurance transactions, and revoking previous tax benefits, with the aim of aligning with the OECD and increasing revenue.

Most of the changes came into effect on May 23rd, 2025, except for a few provisions, which will come into effect on June 1 of this year.

Among the changes, the main ones stand out:

• Increase in the IOF rates levied on credit transactions, especially for legal entities, from 1.88% to 3.9%, including a new additional rate of 0.95% for legal entity borrowers – This will come into effect on June 1, 2025;
• Operations involving advance payments to suppliers and financing to suppliers (“forfait” or “risk drawn”) are considered credit operations and subject to IOF/Credit;
• Limitation on the application of the zero IOF/Credit rate in credit operations for cooperatives, with a limit of R$100 (one hundred) million reais in the previous calendar year. If this amount is exceeded, IOF/Credit will be levied;
• For exchange operations, the decree increased the rate to 3.5% in most operations such as acquisition of foreign currency, transfers abroad and operations involving the entry and return of investments, in addition to maintaining the zero IOF rate on dividend interest and interest on equity;
• There was a setback in the revocation of the zero-rate benefit for investment fund investments abroad, maintaining tax immunity in this operation, with Decree #12,467 published on May 23rd, 2025;
• For insurance, the decree establishes a 5% rate on contributions exceeding R$50,000.00 (fifty thousand reais), in life insurance plans with survival coverage, increasing the responsibility for collecting IOF;
• Several revocations and old rules were updated, such as the reissue of the incidence limit and the revocation of previous benefits in exchange transactions.is available on the official website of the Brazilian Presidency.

Brazil approves treaty with Sweden to avoid double taxation

The National Congress approved, through Legislative Decree #167/2025, the Protocol of Amendment to the Convention between Brazil and Sweden for the Avoidance of Double Taxation with Respect to Income Taxes. The text was signed in São Paulo on March 19th, 2019 and aims to modernize the tax rules applicable between the two countries.

The official promulgation was made by the President of the Federal Senate, Senator Davi Alcolumbre, on May 5th, 2025, as published in the Official Gazette of the Union (DOU).

Among the main update points expected in this type of protocol are:

• Updated definitions on tax residency;
• Clearer rules on the taxation of dividends, interest and royalties;
• Mechanisms for the exchange of tax information between tax authorities;
• Anti-avoidance clauses to prevent abusive tax planning practices.

These measures are important to align the bilateral treaty with the international standards of the Organization for Economic Cooperation and Development (OECD), of which Sweden is a member and Brazil seeks to increasingly approach.

Importers in São Paulo will have mandatory use of the DUIMP system from June 1st, 2025 for operations with full exemption from ICMS

The São Paulo State Treasury announced that, as of June 1st, 2025, the electronic DUIMP system will be mandatory for importers who use the Single Import Declaration system and are dealing with cases of full exemption from ICMS. Until that date, use of the system will be optional, allowing importers to adapt to the new requirements to speed up the process of releasing goods.

According to the agency, the implementation aims to automate and streamline the processing of imports, especially for cases of full exemption from ICMS, reducing the need for manual analyses and increasing the efficiency of procedures. Importers who use the system before the deadline will have benefits such as automatic release and issuance of electronic visas at GLME (Foreign Goods Release Guide), facilitating customs clearance.

As of June, those who continue to use the old system (SIMP) will need to reprocess their declarations to ensure compliance. The Secretariat emphasizes that, although the use of DUIMP will be mandatory after the deadline, it is recommended to adopt the platform in advance to obtain greater agility in the import process.

The transition schedule is aligned with the guidelines of the Federal Revenue Service and SECEX, which will continue to monitor the gradual implementation of the system. Importers and operators must monitor SISCOMEX updates to ensure compliance with the new rules.

New Income Tax Withheld at Source (IRRF) table came into effect on May 1st

The new Income Tax Withheld at Source (IRRF) table came into effect on May 1st, 2025, as per Provisional Measure #1,294/2025. The change updates the income brackets and rates applied to salaries and other income from salaried work, directly impacting companies' payroll and the amounts withheld from employees.

The new progressive monthly IRRF table establishes five income brackets, with rates ranging from 0% to 27.5%, depending on the monthly calculation basis for taxable income.

The adjustment modifies the limits from which the tax is withheld at source by employers, directly influencing tax calculation and employees' net remuneration.
See the new table in effect below: 

New NF-e format begins testing in July and will require adjustments

Starting July 1st, the new Electronic Invoice (NF-e) model will enter the testing phase throughout the country, made official through Technical Note 2025.002-RTC, due to the Tax Reform. The change will require important adjustments on the part of companies, especially in the layout for generating the XML.

The main novelty is the unification of five taxes into a single charge. Starting with the new version, documents will need to include the CBS (Contribution on Goods and Services) and IBS (Tax on Goods and Services) taxes, which will be responsible for replacing PIS, COFINS, IPI (partially), ICMS and ISS. The new taxes will be divided between the federal (CBS) and state and municipal (IBS) levels, both of which will be taxes on added value (VAT), aiming to eliminate cumulativity and cascading charges in the Brazilian tax system.

Starting in July, the insertion of information related to IBS, CBS and IS will be optional and will not be subject to validation. However, from January 2026 onwards, the validation rules for IBS and CBS taxation will come into effect, making the correct completion of these fields mandatory for all NF-e and NFC-e issuers.

Therefore, in view of the main change brought about by the Reform, the new version of the NF-e has significant changes in the document's structure, aiming to adapt to the new taxes. Among the new features are

• Inclusion of new fields: specific fields were added to inform the amounts of IBS, CBS and the Selective Tax (IS), in addition to tax status codes and tax classification for each item on the invoice.
• Creation of specific events: new events were created to calculate and control taxes, including generic cancellation events and tax authority statements on credit transfer requests.
• Layout changes: the NF-e layout was modified to accommodate the new fields and events, requiring the updating of the invoice issuing systems.

New tax assessment and collection system for the Tax Reform will begin to be tested in June by 500 companies 

Tax reform will take a new step in June with the completion of the Contribution on Goods and Services (CBS) software, developed by Serpro. 500 companies will be selected to test the new tax assessment and collection system created by the tax reform.

The selected companies will have access to a restricted environment to simulate the operation of the new tax, test ERPs (business management software systems) and send tax documents.

The new CBS system is expected to go into operation on January 1, 2026, with full use only in 2027.

To make it easier for companies to use the new system, a specific website will be launched to discuss the changes in the tax reform.

Other new features of the new collection system were announced in the webinar. In addition to the calculator, the system includes a pre-filled declaration, provided by the Federal Revenue Service and the Steering Committee formed by states and municipalities, and adaptation to the new National Registry of Legal Entities (CNPJ) composed of letters and numbers.

The change will not affect existing numbers, which will remain valid, but companies will need to adjust their systems to carry out transactions with customers and suppliers with alphanumeric CNPJ numbers, according to Marcos Hübner Flores, manager of the Program for Implementation of Tax Reform Operating Systems at the Federal Revenue Service. The new CNPJ number should go into operation at the end of the first half of next year.

The platform will be accessed through the Gov.br portal, with a single login and integration between the Federal Revenue Service and the Management Committee systems. The goal is to offer a unified experience to taxpayers and ensure that the data processed by the CBS and the Tax on Goods and Services (IBS) are always synchronized.