BRAZIL Law and Practice Contributed by: Mariana Cobra, Janaína Vargas, Mayara Zanini and Marcela Freire, Mattos Filho
tive since this kind of entity is not obligated to audit and publish its financial documents. Also, in an LLC the share capital may be paid in full through the incorporation of shareholders’ assets, with the respective value set and agreed upon by the shareholders, while in a corporation the law requires such assets to be evaluated by a specialised valuation firm. Furthermore, in a corporation when the share capital is fully paid in cash the law requires at least 10% of the share capital to be paid on the date of the incorporation, while with the LLC the entirety of the share capital payment may be postponed or paid in instalments. Although some costs may differ from case to case, the choice of the corporate entity for investment is much more related to the client’s desirable governance and liability management than to the maintenance costs itself. FIIs and FIAGRO are closed-end funds for investment, respectively, in real estate and rural land. Investment funds do not have corporate personality and their assets consist of the assets and rights acquired, in a fiduciary capacity, by a fund manager authorised by the Brazilian Securi - ties Commission. Such funds shall bear management fees as well as other recurring expenses of the fund, such as fees paid to accounting and valuation firms, reg - ulatory fees and expenses related to the underly - ing real estate assets. Such organisational and operating costs may impose a threshold on the formation of FIIs depending on the size and vol - ume of the envisaged transactions, which shall be assessed on a case-by-case basis.
Such funds are designed to provide investors with a recurrent flow of proceeds. As such, the laws mandate FIIs and FIAGRO to distribute at least 95% of net profits (cash basis) based on biannual balance sheets. On the other hand, the law provides individuals with a 0% tax rate over such recurring distributions if certain require - ments are met. International investors may also benefit from exemption over the capital gains arising from the sale of such funds interest on the Brazilian stock exchange. 5.3 REITs There is no real estate investment trust (REIT) available. FIIs and FIAGRO are similar to REIT. Please refer to 5.2 Main Features and Tax Impli- cations of the Constitution of Each Type of Entity . Although their fundraising can take both private and public forms, they must fulfil statutory rules and are subject to regulation by the Brazilian Securities Commission. If certain legal requirements are fulfilled, the income and capital gains earned by FIIs and FIA - GRO may be exempted from income tax, which is owed at the investor level. Foreign investors may invest in such funds. 5.4 Minimum Capital Requirement A minimum capital requirement is not required by law. Please refer to 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity for further information on costs. 5.5 Applicable Governance Requirements Corporations The management of a corporation is carried out by a board of officers, and a board of directors,
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