BRAZIL Law and Practice Contributed by: Guilherme Bueno Malouf, Luciana Costa Engelberg, Bruna Marrara and Thales Saito, Machado Meyer Advogados
4. Legal, Regulatory or Tax Changes 4.1 Recent Developments and Proposals CVM Resolution 175 came into force on 2 Octo - ber 2023 (except for some specific rules that apply later) and significantly changed the regu - latory framework applicable to investment funds in Brazil. Tax Law 14,754/2023 substantially modified the overall tax treatment applicable to investment funds in Brazil, and the main changes provided for by such legislation are described below: • As of 1 January 2024, earnings derived by investment funds, including closed-end funds, are subject to the come-quotas taxa - tion. for Reform Regulatory • Earnings and gains of certain funds such as FIPs, FIDCs, Stock Funds (FIA) and ETFs are not subject to such regime if they (i) qualify as an investment entity on the terms defined by the National Monetary Council, and (ii) com - ply with the following requirements: (a) FIPs shall comply with the portfolio composition requirements established by CVM; (b) FIDCs shall have a portfolio composed of at least 67% of credit rights and comply with the portfolio composition require - ment within 180 days from the first sub - scription of quotas. (c) FIAs shall have a portfolio composed of at least 67% of variable-income financial assets (eg, shares, subscription certifi - cates, share deposit certificates, BDRs, etc), regardless of whether they are quali - fied as investment entities.
(d) ETFs shall comply with the portfolio composition, classification and reclas - sification established by CVM and shall have quotas listed on a stock exchange or organised over-the-counter market (an exception made to Fixed Income ETFs). If the funds do not comply with such require - ments, they will be subject to the come-quotas taxation. Funds of funds Funds that invest 95% of their net assets in FIPs, ETFs (Variable Income) and FIDCs (classified as investment entities), FIAs, FIIs, FIAGRO, FIP-IE, FIP-PD&I and Infrastructure Investment Funds are not subject to the come-quotas taxation. Foreign quota holders of Brazilian investment funds are not subject to the come-quotas taxa - tion if they are not domiciled in a low-tax juris - diction. Different quota classes In cases in which the investment fund has differ - ent quota classes, with different rights and obli - gations, and segregated net equity of the fund for each class, each quota class will be consid - ered a fund for tax purposes. The transference of quotas among different sub - classes within the same class of quotas is not considered a taxation event for purposes of the WHT imposition if there is no change in quota ownership and no distribution is to quota hold - ers. Funds reorganisations Law 14,754/2023 introduced the tax treatment that should be observed in mergers, spin-offs and transformations of investment funds.
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