IOF stands for Tax on Financial Transactions, levied on individuals and legal entities that engage in credit, exchange, insurance, or securities transactions
The IOF is provided for in article 153, V of the Federal Constitution:
Art. 153. It is up to the Union to institute taxes on:
[...]
V - credit, exchange and insurance transactions, or related to bonds or securities;
The tax nomenclature derives from the purely financial nature of the operations described in item V of article 153 of the Federal Constitution. Thus, any conduct that falls under these activities will be subject to the collection of IOF.
IOF Features
The tax on financial transactions is:
Federal: as it is instituted by the Union, no matter which federative entity collects the tax.
Private: because the Federal Constitution does not allow the Union to delegate its institution.
Extrafiscal: unlike fiscal taxes (whose only objective is to collect for the public coffers), the IOF has an extrafiscal purpose of regulating the market, focusing on circulation and production.
Unbound: because the taxable event (a situation that creates the tax obligation) is independent of any state activity. What generates the obligation to pay IOF is always a taxpayer's activity.
Non-binding collection: the State is free to use the amount collected from the IOF on any expenditure provided for in the budget.
Indirect: Your finance charge (obligation to pay) can be transferred to someone else.
Real: does not take into account the taxpayer's personal attributes. It focuses on things and not people.
What is the triggering event for the IOF?
According to article 113, §1 of the National Tax Code, the triggering event for the obligation to pay a tax is a situation defined by law as necessary and sufficient for its occurrence. It is important to pay attention to each term provided for by law as most tax lawsuits discuss the occurrence or not of the triggering event.
In the case of the IOF, the triggering events are provided for in detail in article 63 of the National Tax Code, which provides:
Art. 63. The tax, under the jurisdiction of the Federal Government, on credit, exchange and insurance transactions, and on transactions related to bonds and securities has as its triggering event:
I - as for credit operations, its execution by the total or partial delivery of the amount or value that constitutes the object of the obligation, or its making available to the interested party;
II - as for foreign exchange transactions, its execution by the delivery of national or foreign currency, or of a document representing it, or its placement to the disposal of the interested party in an amount equivalent to the foreign or national currency delivered or made available by This one;
III - as for insurance operations, its execution by issuing the policy or equivalent document, or receiving the premium, in accordance with the applicable law;
IV - as to transactions related to bonds and securities, the issue, transmission, payment or redemption thereof, in accordance with applicable law.
In cases of withdrawal from a savings account, the Federal Supreme Court has already ruled that it is not equivalent to a credit operation, therefore, IOF is not levied. The understanding is provided for in summary 664.
What is the IOF calculation basis?
The calculation basis is the amount on which the rate applies (percentage or fixed amount that defines the amount to be paid). While the calculation bases are provided for by law, the rates are variable.
The IOF calculation bases are explained in article 64 of the National Tax Code:
Art. 64. The tax calculation basis is:
I - as for credit operations, the amount of the obligation, including principal and interest;
II - as for foreign exchange transactions, the respective amount in national currency, received, delivered or made available;
III - as for insurance operations, the amount of the premium;
IV - as to transactions related to bonds and securities:
a) upon issuance, the nominal value plus the premium, if any;
b) upon transmission, the price or face value, or the value of the stock exchange quotation, as determined by law;
c) upon payment or redemption, the price.
What is the regulatory function of the IOF?
As an extrafiscal tax, the IOF plays a greater role than simply collecting revenue. Through it, the government regulates the market, controlling the supply and demand for credit in the country.
Market regulation through the IOF occurs with the increase and reduction of rates through executive branch decrees. This increase is an exception to the principle of legality, according to which the existence of a law that institutes or increases a tax is mandatory.
The IOF also does not comply with the principles of seniority and ninety. The first concerns the prohibition of collecting taxes in the same financial year in which it was instituted or increased (article 150, III, b of the Federal Constitution). The second consists of the prohibition of collecting taxes within 90 days after their institution or modification (Article 195, §6 of the Federal Constitution).
The principles of anteriority and ninety make up a major principle called the “principle of non-surprise”. According to him, the legislator sought to protect the taxpayer from unexpected charges, while ensuring a reasonable time to prepare to pay the tax.
The regulatory function of the IOF overlaps the principles of legality and non-surprise, given that, to better control the market, the government must have complete freedom to modify the rates of the tax.
See too:
- Tribute
- Tax
- Income tax
- IPTU
- ICMS
- VAT