BRAZIL Law and Practice Contributed by: Ihury Bastos Pereira Darmont, Filipe Starzynski, Karyn Yoshisaki, Ariel Goldstein and Artur Marangoni Cabral Fagundes, Darmont Advogados
Remuneration of Manager Employees for Sales Efforts If the team of asset manager acts in the distribution of fund shares under its management, as permitted by CVM Resolution No 21 and in compliance with the rules set forth in the regulations and self-regulation, it may be remunerated for its efforts in distributing fund shares under its management. Remuneration related to fund management and remuneration related to dis - tribution activities must be disclosed separately. 4.8 Tax Regime for Investors The taxation applicable to investment funds in Brazil varies according to the type of investor and the nature of the vehicle. In general, there are two main taxation regimes that may apply to investment funds: taxation on cash flow events and taxation on invested assets. Taxation on cash flow events occurs whenever there is a cash flow event in the fund, such as the distribu - tion of income, amortisation or redemption of units. In such cases, withholding income tax (IRRF) is applied to the capital gain, calculated: • in the case of redemption, based on the difference between the redemption value of the shares and the acquisition value; and • in the case of amortisation, based on the difference between the amortisation price and the portion of the acquisition cost of the share, calculated based on the proportion that the amortisation price repre - sents of the share’s net asset value. Under the taxation regime for invested assets, IRRF is paid in advance through the come-cotas system where the tax is levied every six months – on the last business day of May and November – on income earned during the six-month period. However, there are special investment fund structures that can be set up to defer this tax, subject to specific legal criteria. General Tax Treatment For investors residing in Brazil, whether individuals or legal entities, taxation is generally levied through
• use of standardised marketing materials or materi - als sent in mass campaigns. The occurrence of any of the above factors may result in the offer no longer being characterised as private. Promotional Materials Informational or promotional materials relating to pri - vate offerings must be restricted to a limited group of previously identified investors, preferably being made available only upon direct request from those inves - tors. Additionally, it is recommended that non-disclosure agreements (NDAs) be entered into with potential investors in order to restrict the improper disclosure of materials and mitigate regulatory risks for participants involved in the offering. Risks of Replicating Foreign Models and Compliance With Local Regulations It is essential that sponsors and managers be aware of the limitations imposed by Brazilian law on the structuring and disclosure of private offerings, espe - cially when compared to more flexible regimes in other jurisdictions. Permissive fundraising strategies in other locations – such as those that allow advertis - ing in private offerings – should not be automatically replicated in Brazil without proper adaptation to the national regulatory framework. 4.7 Compensation and Placement Agents Placement Agents in Brazil The use of placement agents is not widespread in the Brazilian. Currently, there is no specific regulation in Brazil that directly governs the activity of placement agents. Even in the absence of specific regulations for place - ment agents, it is essential to assess the specific nature of the activities carried out by such service pro - viders in Brazil. If the functions performed fall within regulated activities – such as securities distribution, investment consulting, or portfolio management – it will be necessary to obtain prior authorisation from the CVM or another competent regulatory body.
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