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Brazilians have to constantly deal with the many taxes they pay, and often without the proper return in government services.
But, you know What does IOF mean on a credit card? How does this tax work? And how is it collected?
IOF, the acronym for Tax on Financial Transactions, is present in some credit, foreign exchange, insurance, stock exchange and real estate fund transactions.
In short, this is a federal tax whose purpose is to regulate the national economy.
In this sense, the rate charged on each transaction is considered a proportional collection of investments, providing knowledge of the demand and supply of credit.
The percentage charged can change at any time without needing to go through the National Congress, which makes it easier for the government to control these transactions.
Continue reading and learn more about what does IOF mean on a credit card.
What is IOF?
In principle, the IOF (Tax on Financial Transactions) is a tax paid by individuals and legal entities.
This tax is applied to foreign exchange, credit, insurance, securities and other financial transactions.
In short, the IOF changes according to the value and type of financial transaction; this tax is one of the federal government's sources of revenue to regulate the economy.
It is believed that, in this way, the federal government can obtain a parameter for how credit supply and demand works in the country.
Therefore, from this, there is the possibility of equalizing some economic points through rate adjustments.
For example, when revenue increases, there is an increase in financial transactions, which may demonstrate an improvement in the economy due to consumption.
What does IOF mean on a credit card: when is IOF charged?
IOF is charged within a period of up to 30 days.
In this sense, it is charged when there is a credit transaction, and whenever the person makes a purchase and sale transaction of a public security or carries out a credit transaction.
As well as loans and insurance for a period of up to 30 days.
In other words, the incidence exists when transferring an amount to a bank, company or individual.
See the transactions subject to IOF:
- Credit card and overdraft;
- Loan and financing;
- Insurance exchange;
- International banking transactions;
- Acquisition of foreign currency;
- Sales of securities and real estate assets;
- Redemption of fixed income investments such as CDB and Direct Treasury.
It is worth noting that tax collection changes depending on the transaction, and is issued daily, while collection is done monthly.
What does IOF mean on a credit card?
First of all, it is essential to know when the IOF on the credit card is not charged, it is not charged in the following situations:
1. National purchases in cash or installments;
2. Normal payment of the invoice, full amount and on time.
In other words, when using the card normally, you have nothing to worry about regarding this tax.
However, IOF is charged in the following situations:
- International purchases: this tax will be applied to the amount converted into reais;
- Late invoice payment: the amount due goes into revolving credit and IOF + card interest will be charged during the delay;
- Invoice installment: IOF + card interest is charged on the installment amount;
- Minimum or partial payment: the remaining amount of the invoice goes into revolving credit, with IOF + card interest charged for the period:
- Purchases above the limit: for cards with an elastic limit, transactions that exceed the defined limit are subject to IOF;
- Withdrawals: every time you withdraw money with your credit card, you are borrowing money and will also pay the IOF tax.
Therefore, every time you make an international purchase that involves using credit, you will need to pay IOF.
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How much is this tax on the credit card?
As already mentioned, the value of this tax changes depending on the transaction carried out.
For example, in installment, withdrawal and relative credit operations, the value is between 0.38% and 3.38%.
What is the value for 2024?
See the value of the Tax on Financial Transactions for 2024:
- IOF for international credit card transactions 4,38%;
- For the purchase of foreign currency in cash, 1.1%, on the total;
- IOF for foreign exchange transactions 0.38%;
- Financing and loan, between 0.38 and 3.38%;
- IOF for insurance up to 25%.
See what the IOF tax on credit cards for international transactions will look like in the coming years, until it is completely eliminated:
- 2024 4,38%;
- 2025 3,38%;
- 2026 2,38%;
- 2027 1,38%;
- 2028 0,38%;
- 2029 0.
Conclusion
What is IOF on a credit card? You saw that this tax is charged on international transactions and is subject to certain situations.
But the good news is that over time there is a promise that this tax will be eliminated by 2029.
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