Brazil’s startup ecosystem faces a persistent paradox: while innovation is promoted as a driver of growth, regulatory and fiscal measures create significant barriers. The increase in the Tax on Financial Operations (IOF), established by Decree No. 12,466 of May 22, 2025, is a clear example of this contradiction. With high rates on credit operations, international remittances, and other financial instruments, the measure raises the cost of capital and amplifies legal uncertainty, directly impacting startups in critical development phases. More than just a fiscal adjustment, the IOF increase represents an obstacle to the dynamism of the innovative economy, demanding urgent reflection on how to balance taxation and competitiveness.
The changes in the IOF have direct implications for startup financing. The fixed rate on credit operations between legal entities rose from 0.38% to 0.95%, while the annual ceiling jumped from 1.5% to 3%, according to Decree No. 12,466/2025. For companies under the Simples Nacional regime, the IOF on operations up to R$30,000 now reaches 1.95% per year, an increase from the previous rate of 0.88%. Additionally, purchases abroad with credit cards, foreign currency acquisition, and short-term external loans, previously exempt, were announced with a 3.5% rate. For FecomercioSP, the combined effect of these increases will have negative consequences for the Commerce, Services, and Tourism sectors. By making credit more expensive, the measure discourages new investments and tends to force cost pass-through to the end customer. The result is a contraction in consumption, precisely at a time when the economy is still seeking momentum amid persistent inflation.
For startups using convertible notes or seeking international funding, the cost of capital has become higher, discouraging investors and complicating investment rounds. The attempt to tax foreign investments at a 3.5% rate, although revoked by Decree No. 12,467/2025, generated market distrust. This unpredictability affects long-term contracts, especially those without rebalancing clauses, which may become burdensome. The increase in the Tax on Financial Operations (IOF) will cost up to R$19,900 for every US$100,000 moved by companies in international remittances, according to an estimate by XP via InfoMoney.
The impacts go beyond the financial aspect. Compliance with the new rates requires complex adjustments, such as reconfiguring accounting systems and revising international contracts, increasing operational costs. For startups outside major urban centers, access to credit is already more difficult, and the IOF increase exacerbates this situation. The combination of higher costs and legal uncertainty creates a hostile environment where fiscal and regulatory risk becomes as challenging as market validation.
In this challenging scenario, some legal and structural solutions can mitigate the effects of the increased tax burden. One solution lies in raising funds from individual investors, who, under certain contractual structures, can still operate with a lower tax burden than that imposed on legal entity transactions. Another alternative is diversifying financing instruments and strategically using corporate structures that ensure greater legal and tax flexibility, always with proper legal support.
Therefore, the IOF increase is more than just a fiscal adjustment—it is a setback that compromises the market as a whole and especially Brazil’s startup ecosystem. For these companies, which operate with tight margins and depend on agility, the cost of fiscal and regulatory risk is a critical obstacle. Brazil must decide whether it wants to be a hub of innovation or continue penalizing risk-taking with short-term measures. In 2025, the challenge is evident: the barriers for entrepreneurs only increase. Instead of creating an environment favorable to innovation, the state system itself has contributed to instability and insecurity. A globally competitive ecosystem is not built on uncertainties and the persistent ‘Brazil risk.’
