The startup ecosystem in Brazil faces a persistent paradox: while innovation is promoted as a growth engine, regulatory and fiscal measures create significant barriers. The increase in the Tax on Financial Operations (IOF), instituted 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 increases the cost of capital and expands legal uncertainty, directly impacting startups in critical stages of development. More than just a fiscal adjustment, the IOF increase represents a hindrance to the dynamism of the innovative economy, demanding urgent reflection on how to balance revenue collection and competitiveness.
Changes in the IOF have direct implications for startup financing. The fixed rate on credit operations between legal entities has increased from 0.38% to 0.95%, while the annual ceiling rose from 1.5% to 3%, according to Decree No. 12,466/2025. For companies under the Simple National tax regime, the IOF on operations up to R$30,000 now reaches 1.95% per year, an increase from the previous rate of 0.88%. Additionally, foreign purchases with a card, acquisition of foreign currency, and short-term external loans, previously exempt, have been announced with a rate of 3.5%. According to FecomercioSP, the combined effect of these increases will have negative consequences for the Commerce, Services, and Tourism sectors. By increasing credit costs, the measure inhibits new investments and tends to pass costs on to the end consumer. The result is a contraction in consumption, precisely at a time when the economy is still seeking momentum amid persistent inflation.
For startups that use convertible notes or seek international investments, the cost of fundraising has become higher, discouraging investors and complicating investment rounds. The attempt to tax foreign investments with a 3.5% rate, although revoked by Decree No. 12,467/2025, generated mistrust in the market. This unpredictability affects long-term contracts, especially those without rebalancing clauses, which can become burdensome. The increase in the Financial Transactions Tax (IOF) will cost up to R$ 19.9 thousand for every US$ 100 thousand dollars transacted by companies in international remittances, according to an estimate made by XP via InfoMoney.
The impacts go beyond financial. Compliance with the new rates requires complex adjustments, such as the reconfiguration of accounting systems and the review of international contracts, increasing operational costs. For startups outside major urban centers, access to credit is already more difficult, and the increase in the IOF exacerbates this situation. The combination of higher costs and legal uncertainty creates a hostile environment, where fiscal and regulatory risks become as challenging as market validation.
In this challenging scenario, some legal and structural solutions can mitigate the effects of the increase in tax burden. One way out is attracting individual investors, who, in certain contractual structures, can still operate with a lower tax burden than that imposed on transactions between legal entities. Another alternative is diversification of financing instruments and the strategic use of corporate structures that ensure greater legal and tax flexibility, always with the appropriate legal support.
Therefore, the increase in IOF is more than a fiscal adjustment, it is a setback that compromises the market in general 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-term measures. In 2025, the challenge is evident: the barriers for entrepreneurs only increase. Instead of creating a favorable environment for 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’.
