BRAZIL Law and Practice Contributed by: Guilherme Bueno Malouf, Luciana Costa Engelberg, Bruna Marrara and Thales Saito, Machado Meyer Advogados
Legal entity quota holders of a FIP-IE are sub - ject to WHT at a rate of 15% upon the income earned upon the redemption and amortisation of quotas and in the case of liquidation of the fund or the sale of the quotas. For foreign inves - tors, the same specific tax treatment afforded to FIPs applies to FIP-IEs. The original tax treat - ment applicable to foreign investors in FIP-IEs was also changed by Law 14,711. FIDCs Gains derived by quota holders of an FIDC upon distributions by the fund are subject to WHT. Law 14,754/2023 established the following: • If the FIDC has a portfolio composed of at least 67% of credit rights (“Diversification Rule”), gains arising from the investment in the FIDC shall be subject to WHT at a general 15% rate; • If the FIDC adheres to the Diversification Rule and qualifies as an investment entity accord - ing to the regulations set by the National Monetary Council, its investors will not be subject to “come-quotas” taxation. In this case, the 15% WHT will only be applicable upon the actual distribution of income, the amortisation, or the redemption of quotas. On the other hand, if the FIDC follows the Diversification Rule but does not qualify as an investment entity, different rules apply. In this scenario, quota holders will face mandatory “come-quotas” taxation, and a 15% WHT will be imposed in May and November of each year on the income and gains accrued up to those dates. This tax will also apply upon the investor’s actual redemption or amortisation of the quotas, whichever comes first.
If the Diversification Rules is not met, then the general rule is that gains arising from the invest - ment in the FIDC shall be subject to WHT at regressive rates from 22.5% to 15%, depending on whether the fund is qualified as a long-term investment (if the FIDC portfolio has a term of more than 365 days) or a short-term investment (if the FIDC portfolio has a term of less than 365 days), as follows. • Long-term investment: (a) 22.5% rate – investments term up to 180 days; (b) 20% rate – investments term from 181 days up to 360 days; (c) 17.5% rate – investments term from 361 days up to 720 days; and (d) 15% rate – investments term over 720 days. • Short-term investment: (a) 22.5% rate – investments term up to 180 days; and (b) 20% rate – investments term over 180 days. As the FIDC that does not comply with the Diver - sification Rule is not subject to the specific tax treatment provided for by Law N. 14,754/2023, it is subject to the general rule of “come-quotas” provided by said legislation, which applies as follows: • Long-term investment: mandatory imposi - tion of “come-quotas” and subjection of the accrued earnings of the investor to the WHT at a 15% rate in May and November of each year or at the date of the effective redemp - tion or amortisation of the quotas – whichever occurs first. • Short-term investment: mandatory imposi - tion of “come-quotas” and subjection of the accrued earnings of the investor to the WHT
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