Government Provides Tax Relief For Exporting Firms’ Hedge Operations

RIO DE JANEIRO—Responding to pressure from exporting firms, the Brazilian government March 16 issued a decree exempting exporters from a 1 percent tax on currency hedge operations.

In July 2011, the government created a tax on foreign exchange derivatives in an effort to curb the appreciation of the country’s currency against the dollar (146 DTR I-2, 7/29/11). The 1 percent financial operations tax (IOF) was levied on net short dollar positions on the futures market above $10 million.

The tax began to be levied in January on any increase in a company’s net exposure in short dollar positions ...