Brasília – Foreigners who acquire stakes in real estate investment funds on Brazilian stock exchanges will not be required to pay the Tax on Financial Operations (IOF, in the Portuguese acronym). This Thursday (31st), the federal government issued Decree 7,894 on the Official Gazette exempting said operations from the contribution.
According to the joint executive secretary to the Ministry of Finance, Diogo Henrique Oliveira, the previous decree which regulated the matter was dubious, and could inhibit the presence of foreigners on the market, which has strong potential for growth.
In the interpretation of the Federal Revenue Service, the shares of these funds were fixed-income shares, therefore the 6% IOF aliquot had to be collected. Foreign investors, however, were not meant to collect the tax because these shares had a level of volatility similar to variable-income shares, whose purchase is tax-free for foreigners. In doubt, the Ministry of Finance decided not to collect the tax.
“I believe real estate funds will be highly attractive, considering the profitability stemming from interest rates, and the fact that stock exchanges are somewhat stable. I believe investors will set out to make their portfolios profitable, and these funds are a very interesting option,” said Diogo Oliveira.
The secretary also said the measure will bear little influence on the Brazilian foreign exchange market, despite the fluctuations in dollar price. “The total impact of this change on the forex market will be negligible. It has no practical consequences on the forex market,” he said.
Diogo Henrique seconded the position of Finance minister Guido Mantega, who spoke in favour of a floating exchange rate yesterday (30th). After attending the National Meeting of New Mayors at Brasília’s Ulysses Guimarães Convention Centre, Mantega commented on the fact that the US dollar is now worth less than 2 Brazilian reals, and noted that there are no scheduled changes in exchange rate policy.
“This fluctuation is a normal thing. We will not allow the real to over-appreciate. And a word of warning: do not grow too enthusiastic, because it will not happen. Do not expect an exchange rate meltdown. And do not buy into the notion that this is a price-lowering instrument,” the minister said.
*Translated by Gabriel Pomerancblum
