Brazil's finance minister has ruled out ending the income tax exemption on investment returns on overseas holdings of local bonds.
Speculation has grown that the removal of the exemption was one of the measures being studied by the government in the medium-term for curbing the strength of the real.
Finance Minister Guido Mantega said he was satisfied that his recent measures to curb the real would work. The transaction tax on foreign investment in local bonds (IOF) has been raised from 2% to 6% in the last month, and it has been tightened up to make it more effective.
Before the exemption was instituted in 2006, foreign investors paid income tax at 15% on their investment returns.
In order to come into force in 2011, the proposal to remove the tax exemption would have required congressional approval before the end of the year.
.Tags: tax | investment | capital markets | Brazil | currency
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