PTAX: What it is and how it works

Business

Trading in general is a practice that has money transactions as one of its most important aspects and, when we’re talking about International Trade, the money flow is constant and involves many different currencies each with their own values. The PTAX is a vital part of the financial aspect of international trade and very important to understand the value of foreign currencies compared to the value of the Brazilian Reais and how this impacts the country’s relationship with the trading market.

What is PTAX

It’s a tax used as a reference to determine an average equal value between Brazilian Reais and foreign currencies. In other words, it tells us “How many reais a foreign currency cost.”, and it applies to all currencies, each of them having their own PTAX value based on their market status.

It’s important to note that this is not the same as the exchange rate: While the value of the exchange rate changes according to the market during the course of an entire day, once the PTAX’s daily value is stablished and disclosed, it doesn’t change again before the next day.

Many companies, including carriers, use a spread to establish the value used in their business transactions. This spread is the PTAX value plus an extra tax that has a value stablish by the company itself.

How does it work?

Based off the buying and selling operations made through the day by the institutions that are a part of Brazil’s National Finances System, the Central Bank of Brazil makes four consultations a day during a specific time window to determine an average between the values involved in the operations.

The necessary data is informed by the dealers, and four consultations are made, from 10AM to 1:10PM. After the last consultation, the bank calculates the average value between the buying and selling operations and the PTAX value is shared with the market and it serves as a reference for monetary transactions.