IOF on checking account agreements

Federal Administrative Court of Appeals“CARF”) recently published a decision analyzing the charge of Tax on Credit, Exchange and Insurance Operations or relative to Equities or Securities“IOF”) on checking account agreements.
Even though the final decision was unfavorable to the taxpayer, maintaining the tax assessment, the sentence recognizes that IOF shall not be charged on typical checking account agreements, in which the parties enter into debit and credit amounts that they mutually oblige to deliver to the other. Such decision differs from the view previously expressed by CARF that that all financial transactions under a checking account agreement would be considered a loan and, thus, would be subject of IOF.
In the present case, the availability of financial resources was given unilaterally, with the collection of financial charges. For this reason, the Counselors understood there was a distortion of the checking account agreement and maintained the tax assessment.
Superior Court of Justice have already expressed opinion on this matter, and the prevailing interpretation is that the contractual nomenclature adopted is irrelevant for purposes of IOF collection. In other words, if essential characteristics of a loan are verified, IOF would be charged on the transaction.
Federal Revenue Service have published Answers to Advance Tax Ruling Requests clarifying its interpretation in the sense that, once the elements of a loan agreement are identified, the transaction would be subject to IOF, regardless of the means by which the final resource is made available.
Hence, we understand that the disposition of the checking account agreement, as well as the practice adopted by the companies when the agreement is operationalized, are extremely relevant to assess the risk of characterizing it as a loan.
Candido Martins is at your disposal to provide legal advice in concluding private loan and reciprocal credit agreements.