On September 22 of this year, Provisional Measure (MP) No. 1,137 was published in the Federal Official Gazette, which expands the tax benefits for foreign investors in the Brazilian capital market, thus amending Law No. 11,312/2006.
The main objective of this MP is to encourage foreign investment in Brazilian companies as a way of dealing with the effects of the economic crisis in a world environment of instability. The changes are applicable to investments in funds, bonds or securities subject to public distribution as well as financial bills.
The amendments will take effect as of January 1, 2023, whether the MP is converted into law before this date or the Congress extends the deadline for its approval and conversion into law.
One of the most relevant changes introduced by the MP is the revocation of the prohibition of a single shareholder holding 40% or more of the fund’s shares to apply the zero tax rate to income and capital gains earned by Investor 4,373 in the private equity funds (FIPs), resolving historical legal uncertainty and bringing greater security to investments with FIPs.
Another important change is the revocation of the requirements that the investment portfolio be composed of at least 67% of shares of corporations, debentures convertible into shares and subscription bonuses for the FIP tax treatment to be applicable. With this change, the legal uncertainty for the foreign investor is resolved by expressly reducing restrictions previously imposed by law.
Below is a table summarizing the changes brought by the MP:
