BRAZIL Law and Practice Contributed by: Alberto Malta, Davi Ory, Ana Vogado and Maria Eduarda Amaral, Malta Advogados
5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity The LTDA is commonly used for equity hold - ings and smaller real estate developments. It is favoured for its simplicity and tax flexibility. The corporation (S.A.) is better suited for complex ventures of multiple investors, requiring more structured governance. SPEs are widely adopted to isolate risks in spe - cific projects and facilitate financing, particularly when linked to the special taxation regime (RET), which streamlines and reduces taxes on devel - opment revenue. SCPs are contractual entities without legal per - sonality, composed of an ostensible partner and silent (undisclosed) partners, with taxation solely applied to the ostensible partner. Investment funds, structured as condominiums without legal personality and regulated by the CVM are used in multi-investor operations, offer - ing tax efficiency, limited liability and govern - ance. FIIs are focused on the acquisition, leasing and operation of real estate, with publicly traded shares and potential income tax exemption for individuals, subject to legal conditions. FIAGROs follow a similar model but target agro- industrial real estate, including rural properties while FIPs are used to acquire equity stakes in companies holding real estate assets, combin - ing corporate participation with real estate expo - sure. 5.3 REITs FIIs and FIAGROs are the investment vehicles in Brazil that most closely resemble REITs, although they have key structural differences. Unlike REITs, which are for-profit legal entities, FIIs and FIAGROs are structured as closed-end
condominiums without legal personality. They are regulated by the CVM. These funds are designed for the acquisition, leasing or exploi - tation of real estate assets and may be public (traded over-the-counter) or private (not public - ly traded and restricted to qualified investors). They are open to foreign investors, subject to registration with BACEN and the RFB. FIIs are not taxed at the fund level. Income dis - tributed to Brazilian individuals is exempt from income tax, provided the fund has at least 100 quotaholders, its quotas are traded exclusively on the stock exchange or organised over-the- counter market and the individual holds less than 30% of the fund’s quotas or is entitled to receive less than 10% of its total income. How - ever, capital gains from share sales are subject to income tax. FIIs must distribute at least 95% of their semi- annual profits to shareholders. Law 14,754/2023 also excludes groups of related individuals who jointly hold 30% or more of the fund’s quotas or are entitled to more than 30% of the fund’s total earnings from this exemption. These funds are subject to governance and operational requirements, including manage - ment by an authorised institution, a formal regu - lation document and applicable fees (eg, man - agement, performance, brokerage, custody), which affect net returns to investors. Recent tax reform discussions under Comple - mentary Law No 214/2025 have introduced uncertainty regarding the imposition of the IBS and CBS on FII revenues such as rent. After industry pushback, the government indicated it would reinstate explicit exemptions for these operations to preserve the fund’s tax efficiency.
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