The Imposto sobre Overações Financeiras (IOF) tax in Brazil is a tax on financial transactions. It is a federal tax applied to a wide range of financial transactions involving individuals and businesses. It bears some similarity to the capital gains tax in the United States. Like the capital gains tax, it is regressive, meaning investments that are held for a longer period of time are taxed at a lower rate than those held for a shorter period of time.

According to the provisions of Decree 6,306/2007, the IOF on securities applies in accordance with a regressive table that varies proportionally to the period of the investment, with such period limited to 30 days. In other words, the IOF on securities only applies to the redemption, cession, or refinancing of investments before the above mentioned period.

The following table details how investment gains are taxed over a 30-day period:

IOF fee model example

The following is an example of how this an IOF fee calculation method would be applied.

Investment: $1000 Interest: 1% per day