BRAZIL Law and Practice Contributed by: Ihury Bastos Pereira Darmont, Filipe Starzynski, Karyn Yoshisaki, Ariel Goldstein and Artur Marangoni Cabral Fagundes, Darmont Advogados
the type of offering registration (automatic or ordinary), among others. Investment limits and policies vary mainly according to the product and target audience, being defined by applicable regulations and specified in the fund’s own bylaws. In this sense, in addition to the invest - ment policy that must be observed by each fund, as detailed in general terms in 2.1 Types of Alternative Funds and Structures , funds for retail investors, for example, tend to have more limitations than funds for investors classified by the CVM as qualified or profes - sional investors, who can invest in more flexible funds, including with regard to their investment policy, the charging of fees, and the method of paying for quotas, which may be done by paying in assets in those funds. 2.3 Disclosure/Reporting Requirements Under the Brazilian jurisdiction, there are formal dis - closure requirements and mandatory content imposed by the CVM, both for investment fund offering docu - ments and for the ongoing disclosure of information about these funds. In offering documents, for example, the prospectus ( prospecto ) shall observe the structure and order imposed by CVM Resolution No 160, of 13 July 2022, as amended, with mandatory chapters, sections, and disclaimers that shall be observed and included in the document. The documents prepared in connection with the offer - ings must, under the terms of the applicable rules, contain necessary, sufficient, true, accurate, consist - ent, and current information, presented in a clear and objective manner in direct and accessible language, so that investors can perform an informed investment decision. In the context of the continuous disclosure of informa - tion on investment funds, Resolution No 175 requires that the disclosure of such information be comprehen - sive, equitable, and simultaneous to all quota holders in the fund, with documents and information, such as updated bylaws and descriptions of applicable taxa - tion, among others, made available on computerised channels and websites of the fiduciary administrator, fund investment manager, distributor of quotas, and,
when appropriate, the entity managing the organised market in which the quotas are admitted to trading. Resolution No 175 also requires public disclosure, in a prominent place and with free access to the general public. The CVM also maintains systems and pages with the documents and data of the investment funds, such as bylaws, prospectuses, when appropriate, portfolio composition, relevant facts, and minutes of general assemblies, among others. 2.4 Tax Regime for Funds In Brazil, taxation on investment funds varies depend - ing on the type of investor and the nature of the vehi - cle. There are, in summary, two main types of taxation that may be applied to investment funds: taxation on transactions and taxation on invested assets. In taxation on transactions, taxes are levied whenever there is a movement of resources in the fund, such as a redemption or a distribution of income. In this case, a Withholding Income Tax (WIT) rate is applied to the capital gain, which is calculated as the differ - ence between the sale price of the fund’s quotas and their purchase price. In the case of taxation on invested assets, taxes are levied twice a year, on the last business day of May and November, based on the income obtained in the period (previous six months) – a mechanism known as come-cotas . Nonetheless, there are special invest - ment funds that can be created to defer this obliga - tion. For resident investors, whether individuals or legal entities, taxation is generally based on WIT ( Imposto de Renda Retido na Fonte – IRRF ). Nonetheless, and especially for alternative investment funds, there are other rates and rules. For instance, for Credit Rights Investment Funds, Multimarket Invest - ment Funds and Private Equity and Venture Capital Investment Funds it is possible to have a fixed tax rate of only 15%, provided that the structure complies with some rules, especially of management control and administrative discretion of the vehicle, as well as certain levels of net liquidity and assets composition.
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