Law No. 14,711/2023 published yesterday (10/31), known as the “legal framework for loan guarantees” due to changes in credit rules and the use of assets as collateral, also brought changes in relation to the taxation of funds of investment in participations (FIP), investment funds in shares of investment funds in participations (FIC-FIP), investment funds in emerging companies (FIEE), and investment funds in infrastructure participations (FIP-IE), as per changes promoted in Federal Law nº 11,312/2006.
The 40% limitation for foreign investors in Brazilian funds (FIP, FIC-FIP or FIEE) was revoked and, therefore, the zero rate of income tax levied on income earned becomes applicable even if foreign investors (alone or in together with people linked to them) hold more than 40% of the shares of such Brazilian funds.
The rules for composition of the fund portfolio were removed. There are no longer restrictions that (i) FIP or FIEE invest at least 67% of their portfolio in shares of public limited companies, debentures convertible into shares and subscription bonuses and (ii) the fund’s investments in debt securities are limited to 5 % of your net worth.
The zero income tax rate becomes applicable to foreign investors who earn income from FIP-IE.
And, finally, the new law guarantees a zero rate of income tax on income earned by foreign investors also in the case of sovereign wealth funds, even if located in tax havens, with such sovereign wealth funds classified as investment vehicles abroad with assets made up of resources coming exclusively from the country’s sovereign savings.
The new law determines that the zero income tax rate (i) is not applicable to investors who hold shares located in tax havens and (ii) applies only to FIPs qualified as investment entities in accordance with the rules of the National Monetary Council.
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