It is not yet a presidential decree, but it is the government's second attempt in 14 months. Brazilian newspaper O Globo reported on October 28 that the government's economic team is studying imposing the IOF (Tax on Financial Operations) on agribusiness credit bills (LCA), real estate credit bills (LCI), real estate receivables certificates (CRI), agribusiness receivables certificates (CRA), and tax-exempt infrastructure debentures — assets that are currently tax-free for individual investors. Brazil's Finance Ministry has not commented, and no tax rate, tax base, or effective date has been set.
What Is the Finance Ministry Studying for LCAs and CRAs?
According to O Globo, the proposal is to use the IOF — rather than income tax (IR) — to tax these assets. The distinction matters: IOF tax rates can be adjusted by presidential decree, without congressional approval and without the rule that prevents tax collection in the same fiscal year. In practice, a decree could take effect within 90 days of publication, impacting a market with over R$ 1.5 trillion in combined outstanding issuance. The Finance Ministry's argument is that these tax exemptions represent roughly R$ 33 billion per year in foregone tax revenue.
Exemptions on LCAs, LCIs, CRIs, CRAs, and infrastructure debentures that the government aims to recover, according to the Federal Revenue Service's Tax Expenditure Report
Combined balance of LCIs, LCAs, CRIs, and CRAs, according to 2026 B3 data
Chamber of Deputies struck down a provisional measure in Oct/2025 proposing a 5% income tax on these bonds
Why IOF Instead of Income Tax?
In June 2025, the government issued Provisional Measure 1,303, which proposed a 5% income tax on new issuances of LCAs, LCIs, CRIs, CRAs, and infrastructure debentures. Estimates pointed to R$ 2.6 billion in additional tax revenue in 2026 alone. Congress blocked the effort: the Chamber of Deputies dropped the measure from its agenda in October 2025 by a 251-to-193 vote, with the agribusiness caucus playing a central role in the defeat. The strategy of using the IOF emerged precisely because that legislative path was closed.
The switch in financial instruments is strategically motivated. The IOF serves a regulatory purpose, allowing the Executive branch to modify its rates by decree within legal boundaries. Tax attorneys warn that using the IOF as a purely revenue-raising mechanism creates "legal uncertainty" — but there is no formal legal prohibition stopping the decree from being issued. The market is in a holding pattern: without an established tax rate or launch date, pricing the risk is not yet possible.
How Large Is the Target Market?
LCIs and LCAs alone exceed R$ 1 trillion in outstanding issuance — each holding a total balance of around R$ 540 billion to R$ 563 billion, according to B3 data from June 2026. CRIs and CRAs account for another R$ 437 billion combined. This market relies on income tax exemption to attract retail investors with a lower gross yield that offers a competitive net return against the Selic-rate Treasury bonds (Tesouro Selic). If the IOF is applied, buyers of these assets will demand higher gross rates to preserve their net returns — and the added cost will be passed on to borrowers.
Tax-exempt infrastructure debentures — used to fund private infrastructure projects such as toll roads, energy, and sanitation — are included in the same study. Their tax exemption exists to attract private capital to public works projects that the state cannot finance on its own. Taxing these instruments would increase borrowing costs for these projects, adding further pressure as elevated interest rates already weigh heavily on long-term corporate credit.
What Changes for Agribusiness — and Fiagro Funds
LCAs and CRAs represent the main private financing channels for Brazilian agribusiness. The economic logic is straightforward: income tax exemption attracts individual retail investors who accept lower gross yields, allowing issuers to pay less than they would on a taxable bank CD (CDB), which translates to cheaper credit for rural producers. Under the IOF, this mechanism becomes more expensive — investors will demand higher yields to maintain net returns, and borrowers will bear the financial burden.
"My sense is that the government is taking from the farm sector with both hands. It pushes up funding costs through its fiscal policy while simultaneously trying to raise the cost of private mechanisms that finance agricultural production."Octaciano Neto, founder of Zera and former Agriculture Secretary of Espírito Santo state, speaking to Money Times (10/28/2026)
For agribusiness investment funds (Fiagros) holding CRAs, the impact would be indirect but tangible. If the IOF makes CRAs less attractive to retail investors, demand for new issuances will fall, forcing issuers to offer higher gross rates and putting pressure on paper funds buying these assets. Investors holding existing CRAs with locked-in yields won't see an immediate change — but new fund capital raisings would grow more expensive. Cash flow vulnerabilities in Fiagros relying on continuous portfolio reinvestment would become more pronounced in this environment.
In 2025, Finance Minister Fernando Haddad defended taxation by arguing that "60% to 70% of the benefits stay along the way" — captured by bondholders or the banking system — rather than reaching agricultural producers. Industry representatives contest this, arguing that without tax exemption, farmers face higher borrowing costs even if the full benefit was not passed through previously. Investors tracking tax-exempt bonds offering IPCA+11% yields have already observed the market pricing in part of this risk in recent months, leading to scarcer issuances and higher yields.
Will the Decree Pass? Two Possible Scenarios
Investors require higher gross yields to preserve net returns; LCAs and CRAs lose competitiveness against taxable CDs; credit for agribusiness and infrastructure becomes pricier; paper Fiagros face headwinds in new capital raises. Minimum lead time: 90 days post-publication.
Political opposition from the agribusiness caucus and legal questions around using the IOF as a revenue-raising tool stall the decree; market continues with current yields and full tax exemption.
The market currently lacks a specific tax rate or timeline to price in the proposal. Recent precedent points in both directions: the 2025 attempt was blocked, demonstrating significant political resistance — yet the government revisited the topic in less than a year, showing that R$ 33 billion in annual revenue is too substantial for policymakers to ignore easily.
Assets already purchased will not face immediate structural changes: terms were locked in at issuance. The main uncertainty is whether the government would extend the tax to existing holdings upon future redemption — a detail left undefined. For investors making new purchases now, the risk is political: a long-term tax-exempt LCA could lose its exemption at maturity depending on how the decree is drafted. Paper Fiagros with CRA portfolios renewing over the coming months face the most critical need to monitor these developments.
Official Gazette Publication — any prior statement is a rumor, not a fact; only an official decree establishes the tax rate and scope (existing holdings versus new issuances only)
Yields on New LCA and CRA Issuances — if primary market yields begin rising to offset expected IOF taxation, the trend will register on fixed income platforms ahead of any decree
Fiagro Quarterly Reports — fund managers with CRA portfolios renewing in the next six months will address this risk; prolonged silence may indicate the decree has lost political momentum
