Government MP will tax exclusive funds to offset increased IR exemption, says secretary

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In May, the government published a provisional measure that makes those who receive up to R$ 2,640 a month exempt from income tax. Executive even proposed taxation of investments abroad, but the idea found resistance in Congress. The executive secretary of the Ministry of Finance, Dario Durigan, said this Tuesday (22) that the government will send a Provisional Measure (MP) on the taxation of exclusive funds to compensate for the loss of federal revenue with the increase in the exemption of the Personal Income Tax. Exclusive funds are also known as “super-rich funds”. The fund is made in a personalized way for the shareholder, and the tax payment only occurs when the application is redeemed – a point that the government intends to change (understand more below). In May, the Executive sent another MP raising the IR exemption range. The measure provides that those who earn up to R$ 2,640 per month will not pay income tax. To compensate for the increase in the IR exemption, the government proposed, at the time, the taxation of investments abroad (offshore), but the proposal found resistance in the National Congress. Faced with the lack of agreement between parliamentarians on the taxation of offshore investments, the government decided to invest in a “plan B” and send another compensation proposal to guarantee exemption from IR for workers who earn up to two minimum wages. “This guarantee of readjustment of the IR table will be compensated with a new MP that deals with exclusive funds in Brazil”, said the executive secretary of the Treasury to journalists. According to Durigan, the alternative was agreed with the Legislature. “Dialogue was held today throughout the day, I was at the end of the day with President Pacheco, whom I thank for the dialogue and understanding, and that understanding was closed, the civil office followed, SRI followed, all the ministries followed”. Míriam Leitão: Taxing super-rich funds is necessary What is the ‘plan B’? Current regulations provide that exclusive funds are taxed only when the application is redeemed, unlike other financial investments, which are subject to periodic taxation (the so-called quota eater). As payment only occurs at the time of redemption, if the redemption is postponed, the tax payment is also postponed. The new MP intends to encourage the updating of resources contributed to the funds with a reduced rate of 10%, which will affect the stock of income accumulated in recent years. According to the executive secretary, the level of the rate will be open to negotiation with the private sector and with the National Congress during the processing of the Provisional Measure. In the case of the shareholder who does not opt ​​for the incentive, the MP must also provide for the incidence of a 15% rate for exclusive funds with a period of up to 2 years to regularize the situation. With this, the government expects to raise around R$ 3 billion in 2023, equivalent to the impact of the increase in the IR exemption. And another R$ 7 billion in 2024 – an amount that the federal government counts to zero the public accounts deficit next year.

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