CDB IOF and Income Tax on Early Redemption

IOF and IR on a CDB

Pull money out of a CDB early and two taxes eat into what you earned. The IOF (Imposto sobre Operações Financeiras) only bites on redemptions during the first 30 days, and it does so on a regressive scale: 96% on day 1, 86% on day 2, ... 3% on day 29, 0% on day 30+. Note that it hits the interest you earned, never the principal. The IR (income tax) has its own regressive table: 22.5% up to 180 days, 20% 181-360, 17.5% 361-720, and 15% above 720 days. Take R$ 5,000 at 12% a.a. held for 20 days. It yields roughly R$ 31 gross; IOF at 33% takes R$ 10, then IR at 22.5% on what is left takes R$ 5, leaving net interest near R$ 16. And if you redeem before the contracted maturity on a CDB without liquidity, you usually forfeit the yield outright or have to sell at a discount on the secondary market.

Use cases

Parking cash for under 30 days, where IOF runs the show. Choosing between a CDI-linked, pre-fixed or IPCA+ CDB. Lining up net returns across different maturities. It also helps with an emergency reserve, where the trade-off is liquidity-with-IOF against what a savings account would give you.

FAQ

Does IOF apply after 30 days? No. From day 30 on it drops to zero, so only the IR is left.

Is IOF charged on principal? No, just on the interest portion. The principal you put in is never taxed.

What is the worst-case tax burden? Cash out on day 1 and you take 96% IOF, then 22.5% IR on the sliver that survives. There is basically no yield left.