The increase in IOF is a setback for the startup ecosystem in Brazil

The startup ecosystem in Brazil faces a persistent paradox: while innovation is promoted as a driver of growth, regulatory and fiscal measures create significant barriers. The increase in the IOF (Imposto sobre Operações Financeiras) tax, established by Decree No. 12.466 of May 22, 2025, is a clear example of this contradiction. With high tax rates on credit operations, international remittances, and other financial instruments, the measure increases the cost of capital and expands 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 revenue generation and competitiveness.

Changes to the IOF have direct implications for startup financing. The fixed rate on credit operations between legal entities increased from 0.38% to 0.95%, while the annual cap jumped from 1.5% to 3%, according to Decree No. 12.466/2025. For companies in the Simples Nacional program, the IOF on operations up to R$1,030,000 now reaches 1.95% annually, an increase from the previous rate of 0.88%. Furthermore, previously exempt foreign purchases with credit cards, foreign currency acquisition, and short-term foreign loans now have a 3.5% rate. For FecomercioSP, the combined effect of these increases will have negative consequences for the Commerce, Services, and Tourism sectors. By increasing the cost of credit, the measure inhibits new investments and tends to force cost pass-through to the end consumer. The result is a contraction in consumption, precisely at a time when the economy is still seeking momentum amidst persistent inflation.

For startups using convertible notes or seeking international funding, the cost of raising capital has become higher, discouraging investors and complicating investment rounds. The attempt to tax foreign investments at a rate of 3.5%, although revoked by Decree No. 12.467/2025, created distrust in the market. This unpredictability affects long-term contracts, especially those without rebalancing clauses, which could become burdensome. The increase in the Financial Transactions Tax (IOF) will cost up to R$ 19,9 thousand for every US$ 100 thousand dollars moved by companies in remittances abroad, according to an estimate by XP via InfoMoney.

The impacts extend beyond the financial. Compliance with the new tax rates requires complex adjustments, such as reconfiguring accounting systems and reviewing international contracts, increasing operational costs. For startups outside major cities, access to credit is already more difficult, and the increased IOF exacerbates this situation. The combination of higher costs and legal uncertainty creates a hostile environment, where fiscal and regulatory risk becomes just as challenging as market validation.

In this challenging scenario, some legal and structural solutions can mitigate the effects of increased tax burden. One solution lies in attracting individual investors, who, under certain contractual structures, may still operate with a lower tax burden than that imposed on operations between legal entities. Another alternative is diversifying financing instruments and strategically using corporate structures that ensure greater legal and tax flexibility, always with appropriate legal support.

Therefore, the increase in IOF is more than just a fiscal adjustment; it's a setback that jeopardizes the market as a whole, and especially the startup ecosystem in Brazil. 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 for innovation or continue penalizing risk-taking with short-sighted measures. In 2025, the challenge is evident: barriers for entrepreneurs are only increasing. Instead of fostering an environment conducive to innovation, the state system itself has contributed to instability and insecurity. A globally competitive ecosystem cannot be built on uncertainties and the persistent "Brazil risk."