Offshores: voting with exclusive funds is postponed – 10/04/2023 – Market

The vote on the bill to tax offshore companies and exclusive funds was postponed by the Chamber of Deputies this Wednesday (4).

Now, the text should only be considered on the 24th, due to a trip abroad by the President of the Chamber, Arthur Lira (PP-AL), and other parliamentarians, which should empty the House for the next two weeks.

The report by deputy Pedro Paulo (PSD-RJ) reduced the taxation of offshore companies and exclusive funds from 10% to 6%, following an agreement with the Ministry of Finance as a way of overcoming resistance in the National Congress and paving the way for the advancement of measures, seen as essential for Minister Fernando Haddad’s (Finance) plan to increase federal revenue.

Today, the owners of these resources end up not paying Income Tax on this income due to loopholes provided for in the legislation itself.

The Luiz Inácio Lula da Silva (PT) government proposed to correct this distortion, not only looking to the future, but also taxing the gains obtained in recent years. Taxing this stock was the main impasse in negotiations with the Legislature and, therefore, was the central target of the changes.

Some degree of flexibility in this section was already expected by the Treasury. Despite lower revenue at the start, the ministry sees permanent structural gains, as the proposed rates for charges on future income were maintained.

The opinion was presented by the deputy on Tuesday night (3). The report combines two measures that until then were being processed separately, into a bill and an MP (provisional measure).

Pedro Paulo even considered incorporating the content of another project, which puts an end to JCP (Interest on Own Capital) — an alternative way for a company to remunerate its shareholders by paying less taxes. However, this section ended up being left out of the report.

According to interlocutors, the deputy even discussed an intermediate proposal, more in line with international practices, but the political option that prevailed was to separate the discussions.

Within the Ministry of Finance, there is recognition that the debate on changes to the JCP was the least mature among the measures discussed.

Lira will travel abroad and only return to Brasília around the 20th. On the other hand, from the 14th, the proposal blocks the House’s agenda, due to having an urgent request approved — which means that, from that date onwards, nothing can be appreciated before it.

At the same time, the opposition and the ruralist bench try to obstruct the Chamber’s agenda, in a movement against recent positions of the STF (Supreme Federal Court) on issues that parliamentarians understand to be the responsibility of the Legislature and not the Judiciary.

Furthermore, the government and the center negotiate positions in both Funasa and Caixa, a body that should be handed over to Lira’s allies.

The taxation of resources held by Brazilians in tax havens seeks to place taxpayers who hold investments in Brazil and collect taxes on their income on an equal footing and those who use offshore companies or funds (outside the country) to avoid paying taxes indefinitely.

The measure provides that profits obtained with resources held in tax havens will be taxed at up to 22.5% on the gains, once a year, regardless of whether or not the individual redeems these investments and brings them to Brazil. The percentage is equivalent to the maximum rate already charged on gains from short-term financial investments within the country.

The pillars of the government’s proposal were maintained by Pedro Paulo, who focused the changes in taxation on gains already earned.

The government provided for the possibility for taxpayers to update the values ​​of their assets and rights abroad to market figures, collecting a lower rate (10%) on the capital gain earned since the acquisition of the assets until December 31, 2023. The rapporteur cut the rate to 6%.

In the case of exclusive funds, used by the “super-rich” to invest millions in shares or fixed income while paying less income tax, the current system allows the tax to be collected only when the shares are redeemed or when the fund is liquidated, without the so-called ” come-quotas” — a semi-annual charge on earnings, already applied to other funds in Brazil.

The MP presented by the Lula government sets a rate of 15% on income, to be paid in the months of May and November of each year. This excerpt was maintained by Pedro Paulo.

The government’s measure also provided for a “transitional rule”, the objective of which was to anticipate the collection of income tax on stock that was currently exempt from charges.

The Executive’s proposal was to charge 15% on earnings in 24 monthly installments starting from May 31, 2024. A second option was to collect 10% on earnings in four monthly installments, starting in December 2023.

In his opinion, the rapporteur cut the rate on the stock to 6% and provided for the payment of the amount due in 24 monthly installments starting on May 31, 2024 — in a combination of the most advantageous conditions.