Bill No. 2,646/2020 now returns to the House of Representatives for analysis

On September 19, 2023, the Brazilian Senate approved, with amendments, Bill No. 2,646/2020 (“Bill 2,646”), which allows concessionaires, authorized companies, permit holders, or lessees of public services to issue credit securities called “Infrastructure Debentures”. The funds raised through Infrastructure Debentures must be used for investments in infrastructure or in economically intensive research, development, and innovation.

In summary, the text approved by the Senate establishes that:

• Issuers of Infrastructure Debentures may deduct 30% of the interest payments from the Corporate Income Tax and the Social Contribution on Net Profits calculation basis.
• The tax benefits for Infrastructure Debenture issuers should remain in force as long as such benefits are included in the Federal Government Annual Budget Law.
• Investors shall be subject to Income Tax, to be calculated based on the income derived from Infrastructure Debentures. Such tax will follow the applicable tax rates for fixed-income financial investments. The zero-tax rate provision, nowadays applicable for “Incentive Debentures” issuance under Law No. 12,431/2011, will not apply.

Infrastructure Debentures aim to attract institutional investors to the credit market for the construction of railways, road expansion, improvements to rural road networks, among other projects. It is important to highlight that institutional investors already enjoys specific tax benefits that diminish the appeal of the zero-tax rate regime related to the issuance of Incentive Debentures. In light of that, Bill 2,646 introduces appropriate incentives for credit offerings through institutional investors for the development of the national infrastructure agenda.

Bill 2,646 now returns for review of the House of Representatives.