If 2023 was registered by innovations in the legislation related to tax practice, 2024 could be the year in which we begin to experience a new environment for business.
Taking a brief look back at the main changes in tax legislation that we had in 2023, we can mention:
- Simplification of taxes on consumption: considered the main tax agenda of the current government, and although criticized due to the various concessions made during negotiations in the National Congress, the balance is positive. Proof of this is that the risk rating agency S&P Global Ratings raised Brazil’s sovereign credit rating after the approval of the tax reform. Constitutional Amendment No. 132/2023 aims to simplify and unify tax legislation on consumption, and there will be a transition period of 10 years for the changes to be definitively completed.
- Taxation of offshore companies and exclusive funds: there was a first attempt, in April 2023, to tax offshore companies through Provisional Measure No. 1,171/2023, which came into force in August. After intense negotiations in Congress, in December 2023, Law No. 14,754/2023 was finally approved, which, in addition to incorporating the taxation of offshore companies provided for by the aforementioned Provisional Measure, introduced the new taxation system for exclusive funds, among other important innovations in tax matters, for the individual investor (tax regime for trusts, update of the cost of investments abroad in the DIRPF (income tax statement), option for the transparent tax regime for investments abroad, etc.).
- End of the 40% test for enjoyment of the tax benefit for non-resident investors: an important requirement for enjoyment of the zero rate of Income Tax (IR) on income earned from investments in the Private Equity Funds (FIPs) by non-residents investors was revoked, i.e., the requirement that the investor hold no more than 40% of the FIP equity. Now, non-resident investors can hold any percentage of the fund’s equity, eliminating an important discussion that generated tax assessments and legal uncertainty for foreign investors.
Another significant change approved at the end of 2023 is Law No. 14,789/2023, which limits the calculation of tax credits related to subsidies for investments. The text approved by Congress also imposes limitations on the payment (and consequent tax deduction) of Interest on Equity (JCP) as a form of remuneration to shareholders.
Its a fact that not all changes came to benefit taxpayers. Some of the approved texts still leave room for divergent interpretations, and new thesis can encourage litigation. Still, we are of the opinion that the tax innovations of 2023 represent the beginning of a favorable environment for new investments in Brazil in the near future. We wish a successful 2024 for everyone!