Intercompany Loans to a Brazilian Subsidiary: SCE-Crédito and IOF

Reviewed by Luiz Eduardo da Silva, director of LegalBR. Updated on 22 October 2026. About 9 minutes to read.

Intercompany loans in Brazil are the usual alternative to a capital increase when a foreign parent wants its money back on a schedule. The loan must be registered with the Central Bank before the funds arrive if it reaches US$ 1 million, and since 2025 its term decides whether the inflow bears 3.5% IOF. This guide covers the parent-to-subsidiary loan only: Central Bank registration, IOF, withholding tax, thin capitalization, transfer pricing, contract clauses and the corporate approvals.

When intercompany loans in Brazil make sense

A loan suits funding needs that the parent expects to recover: working capital, a project with predictable cash flow, or a bridge until profits allow dividends. By contrast, a capital increase suits permanent funding and improves the subsidiary’s balance sheet. The choice also has tax consequences that changed in 2026, because dividends to non-residents now bear 10% withholding income tax under Law 15,270/2025.

Many groups combine both: equity to cover the minimum capital needs and a loan for the rest. If the loan later becomes permanent, it can be converted into capital, which our guide on SCE-IED touches on and which needs coordinated reporting in both Central Bank modules.

Registering the loan in SCE-Crédito

Foreign credit is registered in the Central Bank’s external credit module (SCE-Crédito), which replaced the old RDE-ROF, under Resolution BCB 278/2022. The rules sit within the FX framework of Law 14,286/2021, in force since the end of 2022. The Brazilian debtor is responsible for the information, and the foreign lender must first be declared in the non-resident register (CDNR).

For a loan whose funds enter Brazil, the characterization and financial terms must be declared before the funds arrive. The payment schedule follows within 30 days. After that, the borrower reports within 30 days any change in maturity, renegotiation, change of debtor, conversion or other movement. Non-compliance can lead to Central Bank fines and, under art. 22 of the Resolution, to a block on financial transfers related to the operation until the issue is fixed. In practice, a blocked remittance of interest or principal is the costliest outcome for treasury.

IOF after Decree 12,499/2025

The tax on financial operations (IOF) applies to the FX settlement of the inflow. Decree 12,499/2025, published on 11 June 2025, set IOF-FX at 3.5% on inflows of foreign loans subject to Central Bank registration with an average term of up to 364 days (Decree 6,306/2007, art. 15-B, XII). Congress suspended the decree in late June, but on 16 July 2025 a Supreme Court (STF) injunction reinstated it, except for the provisions on supplier finance (risco sacado). The injunction was an individual decision pending review by the full court, so check its status before relying on it. As a result, short intercompany loans became materially more expensive.

Three structuring points follow:

• Average term, not final maturity. The test uses the average term of the loan, so early amortizations shorten it. Model the schedule before signing.
• Longer loans fall outside the 3.5% item. Loans with an average term above 364 days are not covered by item XII. Confirm the applicable rate with your FX bank before each disbursement, and avoid prepaying or converting the loan early without checking the IOF effect.
• No IOF-credit on the foreign loan. IOF on credit operations does not apply to external credit, which is taxed only through the FX settlement. However, domestic loans between Brazilian group companies bear IOF-credit at the higher rates set in 2025.

IOF rates change by decree with immediate effect, so check the current rate on the day you close the FX contract.

Withholding tax, thin capitalization and transfer pricing

Withholding income tax on interest

Interest paid or credited to a non-resident lender bears 15% withholding income tax, or 25% if the lender is in a low-tax jurisdiction. A tax treaty with the lender’s country may reduce the rate. The Brazilian borrower withholds and pays the tax. If the contract has a gross-up clause, the tax is borne by the borrower and the taxable amount increases accordingly.

Thin capitalization

Under Law 12,249/2010, interest paid to a related party abroad is deductible only if the debt is necessary to the business and within these limits:

• debt with a related lender that holds equity in the Brazilian company: up to twice that lender’s equity participation;
• debt with a related lender that holds no equity: up to twice the Brazilian company’s net equity;
• in aggregate, up to twice the combined participation of related parties;
• lender in a tax haven or privileged regime: total debt up to 30% of the Brazilian company’s net equity.

Interest on the excess is not deductible. Therefore, a lightly capitalized subsidiary may need equity before it can deduct interest on a large loan.

Transfer pricing

Law 14,596/2023 brought Brazil’s transfer pricing rules in line with the arm’s length principle from 1 January 2024. The old fixed interest benchmarks no longer apply. Instead, the interest rate should reflect what the subsidiary could obtain on its own credit standing, and the operation can be recharacterized as capital when it lacks the features of real debt, such as a fixed maturity and repayment capacity. Financial transactions must also be covered in the transfer pricing documentation. See our guide on transfer pricing in Brazil and the corporate tax overview.

Contract clauses for an intercompany loan in Brazil

A short contract is fine, but it must support the Central Bank registration, the IOF position and the transfer pricing file. Check that it covers:

• parties exactly as registered (the subsidiary’s CNPJ and the lender’s CDNR data);
• currency, principal and disbursement dates;
• interest rate and basis, consistent with the transfer pricing analysis;
• amortization schedule and resulting average term;
• tax clause: withholding, gross-up if agreed, treaty documentation;
• prepayment and conversion rights, with a reference to Central Bank reporting;
• governing law and jurisdiction, and the language of the contract;
• signatories with authority on both sides.

Foreign-language contracts used before Brazilian authorities may need a sworn translation. Our guide on apostille and sworn translation explains when.

Corporate approvals and the approving minutes

Brazilian law does not require a specific registry filing for an intercompany loan. However, the subsidiary’s articles or bylaws often require quotaholder or board approval for borrowing above a threshold, and auditors and banks will ask for it. Approving minutes typically record:

• the lender, the amount, currency, interest and term;
• the business purpose of the funds;
• authorization for the administrators to sign the contract, the FX contracts and the Central Bank registration;
• for a related-party lender, a statement that terms reflect market conditions.

If the articles require quotaholder approval, the foreign parent signs as quotaholder, which brings in its signing route abroad. Minutes of quotaholders’ meetings of a limited company are filed at the Board of Trade under the general rules. Our guide on entity management covers how groups keep these records.

From term sheet to first interest payment

1. Price and structure

   Set the amount, currency, rate and schedule with tax advisers, checking thin capitalization headroom and the average term for IOF.

2. Approve on both sides

   Obtain the parent’s internal approval and the subsidiary’s minutes required by its articles.

3. Register the lender

   Declare the foreign lender in the CDNR if it is not already there.

4. Register the loan

   Enter the operation in SCE-Crédito before the funds arrive, if it reaches US$ 1 million.

5. Close the FX contract

   Give the bank the registration number and contract; IOF is withheld on settlement.

6. Report the schedule and changes

   Declare the payment schedule and any later change or conversion within 30 days.

7. Pay interest

   Withhold and pay income tax, then remit through the bank, linked to the registration.

Common mistakes

• Funds before registration: the money arrives before the SCE-Crédito declaration, creating a mismatch that is hard to fix.
• Short loans by accident: early amortizations push the average term under 365 days and trigger 3.5% IOF.
• Equity in disguise: no maturity, no interest paid, interest only capitalized, inviting recharacterization.
• Ignoring thin capitalization: interest on excess debt is not deductible.
• Stale schedule: renegotiations or extensions not reported within 30 days, blocking later remittances.
• Uncoordinated conversion: the loan is capitalized without the 30-day conversion report to the Central Bank, so SCE-Crédito and SCE-IED no longer match.
• Missing approvals: the articles require quotaholder approval that was never documented.

Questions investors ask