As widely reported, on January 16, 2025, President Luiz Inácio Lula da Silva signed Complementary Bill 68/2024 into law, which has now become Complementary Law No. 214, the first legislation in the context of the Consumption Tax Reform. While the enactment was celebrated, it also brought unwelcome surprises for investment fund managers, particularly for Real Estate Investment Funds (FIIs) and Agro-Industrial Production Chain Funds (Fiagros), due to presidential vetoes.
The final version of the bill submitted for approval included investment funds among those classified as non-taxpayers. Consequently, even for operations defined as taxable events, investment funds would not be subject to the Goods and Services Tax (IBS) or the Social Contribution on Goods and Services (CBS). The exceptions outlined pertained to specific conditions under income tax legislation:
- Not being classified as investment entities (in the case of Funds of Investment in Receivables – FIDCs);
- Not meeting the requirements for income tax exemption on income paid to shareholders (in the case of FIIs and Fiagros);
- Being subject to taxation applicable to legal entities (also for FIIs and Fiagros).
However, during the presidential approval process, provisions that excluded investment funds from being classified as taxpayers were vetoed, along with qualifications that defined when FIIs and Fiagros could be taxed. For FIDCs, provisions that subject only those funds not classified as investment entities to IBS and CBS remained.
What to expect now?
With the enactment of Complementary Law No. 214/2025, investment funds are now considered taxpayers of IBS and CBS, subject to taxation on transactions defined by law as taxable events. Generally speaking, for investment funds, taxable transactions include real estate transactions and those characterized as financial services, such as those conducted by FIIs, Fiagros, and FIDCs. However, since the provisions limiting taxation for FIDCs were maintained, the funds most directly impacted by the vetoes are FIIs and Fiagros, which will now be taxed on real estate transactions in the same manner as other taxpayers.
The presidential vetoes will still be reviewed by the Congress and may be overturned. If this occurs, a new legal controversy is likely to arise since the veto was justified based on alleged unconstitutionality of the provisions that excluded investment funds from taxpayer status.
Regardless of the outcome, authorities seem to recognize that considering the vetoes, provisions regarding fund taxation require greater clarity and detail concerning taxable events.