The Brazilian Federal Government has reduced the rate of the Tax on Financial Transactions (“IOF”) in certain circumstances to 0% to contain the recent devaluation of the Brazilian currency, the “Real”, relative to the U.S. Dollar.

Decree No. 8.023, of June 4, 2013, zeroes the IOF on Foreign Exchange Transactions (“IOF/FX”) levied on the inflow of funds carried out by foreign investors with the purpose of making fixed income investments, as well as to establish or make increases to margin accounts guaranteeing stock, commodities or futures exchange transactions. This tax used to be charged at the rate of 6%. The IOF/FX levied on foreign exchange transactions undertaken by foreign investors making any investments in financial and capital markets is therefore currently zero.

Decree No. 8.027, of June 12, 2013, on the other hand, reduced to zero the IOF on transactions involving bonds and securities (“IOF/Securities”) that used to be levied on currency derivatives. Until June 12, 2013, this tax was levied at the rate of 1% on the adjusted notional amount at the acquisition, sale or maturity of financial derivatives executed in Brazil that, individually, resulted in a short position increase or in a long position reduction.

Due to the continued devaluation of the Real, the Brazilian Federal Government is expected to implement further similar measures in the near future.