After several negotiations, the Chamber of Deputies held a session to vote on Bill 4.173/23, which was approved with 323 votes in favor. There were 119 votes against and one abstention.

Below, we highlight the main points of the approved text:

• OVERSEAS INVESTMENTS
• Financial investments and profits earned by controlled foreign companies (offshores) will be subject to a 15% tax.

The 15% tax rate will be applied annually and automatically to the profits earned by controlled foreign companies that meet the following criteria:

• A Brazilian individual will be considered the controller of a foreign company if: (i) direct or indirect preponderance in social decisions or the power to elect/remove the majority of administrators; or (ii) directly or indirectly hold more than 50% of the share capital/rights to receive profits/assets upon liquidation.
• The company is located in a tax haven or a jurisdiction with preferential tax treatment or generates active income lower than 60% of total income.

Directly held financial investments by individuals will continue to be taxed upon receipt/realization.

• It will be possible to update the cost value of assets held abroad by individuals (to be reported in the Income Tax return to be filed in April 2024, referring to the base date of December 31, 2023) through the taxation of Capital Gains Tax, with a fixed rate of 8%. This tax should be paid in May 2024.
• Trusts will remain classified as transparent structures, therefore the founder must directly declare the assets held by the trust until they are distributed to beneficiaries or upon the founder’s death.

• INVESTMENT FUNDS
• The general rule of taxation with the “come-cotas” for closed and open-ended funds remains (15% for long-term funds and 20% for short-term funds);
• The “stock” of quota appreciation will be taxed at a rate of 8%, payable in 4 installments (Dec/23, Jan/24, Feb/24 and Mar/24) or in 24 monthly installments adjusted by Selic at a rate of 15%, the first of which is due in May/24;
• When considered investment entities, FIPs, FIIM-ETF (except Fixed Income) and FIDCs will not be subject to the “come-cotas”;
• Regardless of whether they are investment entities, FIAs will also remain exempt from the “come-cotas” tax
• The exemption from Income Tax on income from FIIs and FIAGROs will remain only for funds with at least 100 shareholders and provided that the composition of shareholders made up of connected persons is a maximum of 30% of the shares issued; and
• Only controlled entities located in tax havens will be obliged to calculate their profits in an annual balance sheet in accordance with Brazilian commercial legislation. Other foreign controlled entities may choose to prepare their annual balance sheet in accordance with international accounting standards (IFRS) or in accordance with Brazilian commercial legislation.

The bill will now be sent to the Federal Senate for consideration and a vote.