Chamber expected to vote on taxation of investments for the super-rich this week

With the forecast of raising R$20 billion in 2024, and up to R$54 billion by 2026, the taxation of investments by the richest part of the population should be voted on this Tuesday (24) in the Chamber of Deputies. Since the 14th, the urgent bill has been on the agenda in the House.

The rapporteur of the proposal, deputy Pedro Paulo (PSD-RJ), is trying to close an agreement with the ruralist bench on the increase in the number of shareholders in Fiagros, investment funds in agro-industrial chains. The parliamentarian was also defining how the installment of Income Tax on exclusive funds will occur and a possible equalization of rates between these funds and the offshores (investments in companies abroad).

Pedro Paulo also tried to include an intermediate solution to the end of interest on equity (JCP), proposed by another provisional measure. However, the proposal did not prosper due to lack of agreement in Parliament.

The government wanted to have voted on the text last week. However, three parties – PL, PP and União Brasil – asked for the agreement to be maintained for a vote on the 24th, after the return of the president of the Chamber, Arthur Lira, from an official trip to China and India.

Originally, the bill only dealt with the taxation of offshores. However, Lira incorporated into the text a provisional measure issued at the end of August, and still valid, which changes the taxation of Income Tax on exclusive funds. The procedure is the same as what occurred with the provisional measure of the Desenrola Program, attached to the bill that regulates the credit card revolving rate, approved at the beginning of the month.

Cash reinforcement

The government needs to reinforce its cash flow to compensate for the increase in the exemption limit of the Income Tax table, sanctioned this Monday (28) by President Luiz Inácio Lula da Silva. The money is also important to meet the goal of closing the primary deficit in 2024, as stipulated by the new fiscal framework, approved at the end of August by Congress.

Personalized investment instruments, with a single shareholder, exclusive funds require at least R$10 million in entry and a maintenance fee of R$150,000 per year. Today, only 2,500 Brazilians invest in these funds, which accumulate assets of R$756.8 billion and account for 12.3% of the fund industry in the country.

Currently, exclusive funds pay Income Tax (IR), but only at the time of redemption and with a regressive table – the longer the investment, the lower the tax. The government wants to make exclusive funds equal to other investment funds, with a semi-annual income tax charge, known as come-quotas. Furthermore, those who pay tax in advance will receive lower rates.

Regarding the taxation of offshoresthe government wants to institute taxation of trusts, instruments through which investors deliver assets to third parties to manage. Currently, resources abroad are only taxed if the capital returns to Brazil. The government estimates the amount invested by individuals abroad at just over R$1 trillion (just over US$200 billion).

Check out the rapporteur’s proposals

Exclusive backgrounds

• Instrument: originally it was a provisional measure, but the text was incorporated into the bill;

• How it is: taxation only when the investment is redeemed;

• Taxation: rate of 15% (short-term funds) or 22.5% (long-term funds) of Income Tax on income once every semester through the mechanism called come-quotas from the year that he comes. Funds with longer investment periods have lower rates due to the regressive Income Tax table;

• Early update: whoever chooses to start paying off the quotas in 2023 will pay 6% on the stock of income (everything earned until 2023). The government proposed two payment models

– 6% for those who pay in four installments, with the first installment starting in December. In the provisional measure, the government had proposed a 10% rate in this situation;

– 15% for those who pay in 24 installments (two years), with the first installment starting in May 2024.

Offshore and trusts

• Instrument: bill;

• How it is: resources invested in offshore companies, companies abroad that house investment funds, only pay 15% Income Tax on capital gains if they return to Brazil;

• Taxation: annual collection of income from 2024, with progressive rates from 0% to 22.5%, even if money stays abroad. Billing will occur as follows

– exemption on annual installments of income up to R$6,000;

– 15% on the annual portion of income between R$6,000.01 and R$50 thousand;

– 22.5% on the annual portion of income above R$50 thousand.

• Calculation: profits from offshore companies will be calculated by December 31st of each year

• Collection method: taxation of trustslegal relationship in which the owner of the property transfers assets to third parties to manage.

• How do the trusts: currently, Brazilian legislation does not address this type of investment, used to reduce tax payments through tax avoidance (loopholes in the legislation) and facilitate the distribution of inheritances during life;

• Exchange rate variation: profits from a rise in the dollar will not be taxed in two situations

– exchange rate variation on deposits in a current account or on a credit or debit card abroad, as long as the deposits are not remunerated;

– exchange variation of foreign currency for currency sales of up to US$5,000 per year.

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