By Felipe Dias, Gustavo Arbach and Lucas Bizzo
O The year 2023 has been marked by major legislative changes in the most diverse areas, a situation that poses an additional challenge for regulators and companies in an already turbulent period. This was no different for the financial market, a sector whose regulatory changes have long been studied and closely monitored by the authorities – especially due to financial deepening. Added to this is the need for cash for the Federal Government, which pursues an audacious revenue target, aiming for fiscal balance in the country and a more expansionist public spending policy.
In this context, both regulatory and tax rules were published with the purpose of consolidating the regulation of funds – what was called the regulatory framework for investment funds – and increasing the scope of the income tax (IRRF) on certain investment vehicles. which currently have tax deferral.
On the regulatory side, taking effect since October 2nd, CVM Resolution No. 175, establishes a new milestone, which seeks to modernize the regulatory framework relating to investment funds, systematizing and regulating the innovations brought about by the Economic Freedom Law, as well as consolidating the its rules in a single regulation, with a general part applicable to all categories and a special part that regulates Financial Investment Funds (FIF) and Credit Rights Investment Funds (FIDC).
The standard brought several changes that gained repercussion, considering their impacts on the operations of the funds, as is the case with the issue relating to the share class. Now, funds will be able to establish classes of shares with different rights and obligations, with the creation of segregated assets, which was not authorized. This implies that investment structures that previously required the combination of several funds can now be consolidated into a single fund with multiple classes.
Furthermore, other modifications have been discussed, such as limited liability for shareholders; civil insolvency for investment funds; recognition of the provision of essential services by managers; flexibility in governance; creation of socio-environmental funds; relaxation of investment rules for FIF; limiting leverage for FIF; opening to investors from the general public in FIDC; need to register receivables in FIDC; in addition to other modifications to the new FIDC framework, such as exemption for managers, consultants and administrators in relation to credits, exemption from rating for FIDC shares for qualified investors, and other changes, where the manager may hire a third party to validate the guarantee of rights credits.
It is worth noting that CVM Resolution No. 175/22 has already been amended by CVM Resolution No. 184, on 5/31/23, which introduced nine other annexes, in order to govern Real Estate Investment Funds (FII) Equity Investment Funds (FIP), Market Index Investment Funds (ETF), Mutual Privatization Funds (FMP-FGTS), National Film Industry Investment Funds (FUNCINE), Incentive Share Mutual Funds (FMAI), Cultural Investment Funds and Artistic (FICART), Pension Funds and Investment Funds in Credit Rights for Social Interest Projects (FIDC-PIPS).
The Funds must adapt to changes by 12/31/24, with the exception of FIDC and FIDC-NP, whose deadline is 4/1/24. The provisions relating to the maximum distribution rate and those relating to the establishment of limits for FIFs in relation to capital risk will also enter into force on 4/1/24. To adapt the funds, we see challenges related to the need for new commercial and operational arrangements and the development of new protocols, with the resulting processes
Regarding the issue of taxation, MP 1184/23 was published at the end of August, which proposes the end of the deferral of income taxation in closed-end funds, which, as a rule, will be subject to the quota regime, just like open-ended funds.
With the change, the quota contribution (IRRF) will be levied in May and November of each year, on the semi-annual income, at a rate of 15% (long-term fund) or 20% (short-term fund), with the IRRF due supplementary payment on redemption, amortization or disposal, remembering that the gain on the sale of fund shares is subject to regressive rates (22.5% to 15%).
In addition, the MP provided for taxation of income accumulated by closed-end funds – stocks – until 12/31/23, at a rate of 15%, which can be collected in a single installment until 5/31/24 or in 24 monthly installments. updated (SELIC) as of 5/31/24.
In the case of individuals residing in Brazil, the IR on inventory is reduced to 10% if the tax is paid in advance. To do this, the PF must collect the tax due on income accumulated up to 6/30/23, in four monthly installments from 12/23 to 3/24; and from the second half of 2023, until 6/24, in cash.
Excluded from periodic taxation are (i) FIPs that are classified as “investment entities” (existence of a professional management structure, at the level of the fund or its shareholders) and that comply with the following CVM regulatory requirements; (ii) FIA that hold at least 67% in shares (or similar assets) actually traded on a stock exchange and (iii) ETFs regulated by the CVM, with shares traded on an exchange or organized counter and that are not Fixed Income. These rules are also valid for FOF (Funds of Funds).
FII and FIAGRO are also excluded from the new taxation; FIPs and FIEE (Law nº 11,312/06); FIP-IE and FIP-PD&I (Law nº 11,478/07); Investment funds referred to in Law No. 12,431/11; Funds held exclusively by non-resident shareholders (art. 97 of Law No. 12,973/14); Investment fund in federal public securities held exclusively by non-resident shareholders (art. 1 of Law 11,312/06); and Fixed Income ETFs (Law nº 13,043/14).
Please note that, for FII and FIAGRO, it was established that, as of 1/1/24, the income exemption will only be valid for funds that have at least 500 shareholders and whose shares are effectively traded on the stock exchange or organized counter.
Finally, specifically for situations in which the funds have the nature of a holding company or do not meet the necessary requirements for their classification as an investment entity, there is the possibility of transforming them into a SA, in order to preserve the accumulated income from taxation – given the revocation, with effect only from January 2024, of art. 50 of Law 4,728/1965, and this alternative must be explored on a case-by-case basis. It is necessary to wait for the provisional measure to be converted into law, especially with a view to the changes being discussed in the National Congress.
About Arbach & Farhat Advogados:
Founded in 2014, Arbach & Farhat Advogados operates in the main areas of law by providing highly personalized legal services for companies and individuals. Allied to the social and economic circumstances of their clients, they outline the best strategy according to each case, always seeking a long-term partnership.
Felipe e Gustavo are partners, respectively, in the tax and corporate areas at Arbach & Farhat Advogados
Lucas Bizzo He is a corporate lawyer at Arbach & Farhat Advogados.
