Pedro Rezek Andery Altran
Lawyer at Marcos Martins Advogados
The Federal Supreme Court, in ruling on Direct Action for Unconstitutionality No. 1,763, affirmed that the Tax on Financial Transactions – IOF – is levied on the sale of credit rights by factoring or commercial development companies.
The IOF is a tax levied on credit, foreign exchange and insurance transactions carried out by insurance companies, securities and gold, a financial asset or foreign exchange instrument.
When analyzing the IOF levied on “credit operations”, it was automatically understood that these were operations carried out by financial institutions (financing or loans).
However, article 58 of Law No. 9,532/97 equated operations carried out by factoring or commercial development companies (commercial operation to purchase credits) with those carried out by financial institutions (bank loans or financing), and this is the point discussed in the ADI.
In his vote, Reporting Justice Dias Toffoli explained that factoring involves the provision of various credit management services in order to facilitate the accounting of the factored company, and because it carries out credit operations, it should be subject to the IOF tax
The Rapporteur pointed out that factoring companies are different from financial institutions, however, the National Tax Code does not restrict the incidence of IOF only to credit operations carried out by financial institutions.
Thus, regardless of whether the company is considered a financial institution or not, IOF is levied as long as it carries out credit operations.
Following this decision, there is a tendency for inspections of factoring companies to increase and possible assessments could cause major problems, making it necessary to map them out now and create a plan to manage any tax liabilities.
Marcos Martins Advogados puts its tax team at your disposal to answer any questions you may have on the subject.
