Agriculture bench says it will act to overturn veto on exemption for FIIs and Fiagros

The Parliamentary Agricultural Front (FPA) expressed disagreement with the presidential veto on the tax reform provision on the exemption from taxes on Real Estate Investment Funds (FIIs) and Investment Funds in Agribusiness Production Chains (Fiagros). The position was published after President Luiz Inácio Lula da Silva sanctioned the regulation of the reform with vetoes, on Thursday, 16.

In a note released this Friday, the 17th, the FPA said that the veto “has the potential to raise interest rates, restrict credit and slow down sectors that are engines of economic growth”. In the text, the FPA stated that “it will work in the National Congress to overturn the presidential veto, ensuring the correct treatment of funds, preserving the inclusion of small investors and strengthening Brazil’s sustainable economic development”.

In the project approved by Congress, Article 26 lists some items that are not foreseen as contributors to the Goods and Services Tax (IBS) and the Contribution on Goods and Services (CBS). The 5th paragraph said that FIIs and Fiagros are taxpayers under the regular regime “if they do not comply with the rules provided for exemption from Income Tax on income received by shareholders” or “are subject to taxation applicable to legal entities”.

The 6th paragraph provided that FIIs and Fiagros whose shares are held, in more than 95%, by FII or Fiagro that is not a contributor to IBS and CBS, by a fund of investment constituted and intended, exclusively, to receive resources from supplementary pension benefit plans and personal insurance plans, regulated and supervised by the competent government bodies, and by social security entities and pension funds in the country, regulated and supervised by the competent government bodies.

In its justification, the government claimed that “there is no constitutional authorization for investment funds and endowment funds not to be considered contributors to IBS and CBS”. According to the presidential message, other paragraphs and items related to these investment funds in the article should be deleted.