Brazil to tax asset-backed receivables funds when used as planning instruments
Among the 45 changes to the tax reform regulation bill approved by the House this week are three provisions that make the so-called FIDCs, credit rights investment funds backed by receivables, subject to the new VAT-like taxes: IBS (replacing three federal taxes) and CBS (substituting one state and one municipal tax).
State of play. Article 6 of the approved text states that “investment funds that settle receivables in advance are contributors to the regular IBS and CBS regime.” Article 190 adds that FIDCs and other funds that “settle receivables in advance through discounting trade bills, promissory notes, checks, and other securities subject to assignment” can be taxed.
Why it matters. Today, FIDCs are exempt from the tax on financial transactions (IOF), income tax, and PIS/Cofins (one of the three federal taxes being replaced by the IBS).
- “FIDCs were enabled in Brazil in the early 2000s as an alternative to the traditional lending and factoring markets, as vehicles through which investors could buy receivables without having to follow the rules of financial institutions,” explains Priscila Farisco, a tax lawyer and partner at law firm Viseu who helped…
