Why is it important to talk about it?
Decree No. 11.964 (Decree), published on 03/26/2024, establishes which projects and sectors in the area of infrastructure are considered a priority to receive funds resulting from the issuance of:
- incentivized notes, according to Law No. 12.431, that is, those that offer tax benefits to investors, and
- infrastructure notes, issued under Law No. 14,801, which offer a tax benefit to the issuing company.
The Decree regulates the criteria and conditions for framing and monitoring projects in the area of infrastructure or intensive economic production in research, development and innovation, for the purpose of issuing securities.
Which infrastructure sectors were considered priorities and which were left out?
The Decree listed 15 infrastructure sectors as being priority and able to receive funds arising from the issuance of Incentivized Notes, Infrastructure Notes and other incentivized securities. The inclusion of projects that generate relevant environmental or social benefits was prioritized and, as expected by the market, the oil and gas sectors were excluded, as well as the generation of energy from non-renewable sources. Some sectors previously contemplated were limited by the Decree.
The 15 priority infrastructure sectors are – with some restrictions already established in urban mobility and energy:
- logistics and transportation,
- urban mobility
- energy,
- telecommunications and broadcasting,
- sanitation,
- irrigation,
- free public education,
- free public health,
- public safety and prison system,
- public urban parks and conservation units,
- cultural and sports public facilities,
- social housing, including projects implemented through public-private partnerships exclusively,
- urban regeneration,
- transformation of strategic minerals for energy transition, and
- street lighting
Which projects can be classified as priorities?
In addition to belonging to the sectors mentioned above, projects in infrastructure sectors must:
- be the subject of a concession, permission, authorization, lease or program contract, as the case may be; and
- involve implementation, expansion, recovery, adaptation or modernization actions.
In addition, there will be a need to observe specific requirements, still pending ministerial regulation, for projects in the area of transformation of strategic minerals for energy transition (which will cover mining and mine development activities) and in the sectors framed by the Decree as intensive economic production in research, development and innovation, which involve energy transition, ecological transformation, digital, health industrial complex, aerospace and defense.
Are there additional criteria and conditions?
The sectoral ministries must establish complementary criteria and conditions for the classification of projects in the priority sectors, and may even limit the classification to certain sub-sectors or specific types of projects. The Decree maintained the validity of the sectoral ordinances already issued insofar as they do not conflict with the provisions of the Decree. Therefore, some sectors considered as priorities must remain adherent to the additional requirements provided for in the ministerial ordinances currently in force, in addition to adapting to the Decree.
The issue value of Incentivized Notes and Infrastructure Notes is limited to the capital expenditures of the projects, which still leaves doubts about the possibility of considering the grants due by infrastructure investors in the amount financed with incentivized securities.
How will projects be monitored and supervised?
The Decree brought rules and procedures for the monitoring and inspection of projects subject to Incentivized Notes and Infrastructure Notes.
Regardless of the need for ministerial approval, before the request for registration of the offer with the Brazilian Securites and Exchange Commission (CVM), the issuer of the securities must file with the sectoral ministry, documentation containing details of the investment project, such as priority sector of classification, volume of total resources necessary to carry out the project, start and end dates, among others.
Information on the use of the tax benefit must also be presented to the CVM and included in certain documents of the offer.
The Decree determined that the CVM make available for consultation, on its website, the list of securities offerings with tax benefits.
What about tax benefits? Are there any restrictions?
Lastly, the Decree expressly prohibited the cumulation of the tax benefits provided for in Law 12,431 and Law 14,801. Incentivized notes and infrastructure notes may be issued for the same project, provided that the sum of the amounts raised by such notes does not exceed the amount equivalent to the project capital expenditures.
Our specialists in the areas of infrastructure, capital markets and tax will bring even more news about the Decree and the changes it brings in relation to existing regulations, as well as the opportunities and restrictions on the use of tax benefits. Follow our social media and don’t miss the news.