The preliminary report of the tax reform presented by the rapporteur, deputy Celso Sabino, last Tuesday, the 13th, it was rated positive by the lawyer Tatiana Penido, Tax Partner at Mattos Filho firm. Although she points out that the debate still needs to be deepened, she says that the new version managed to address controversial issues of the original text, such as the return of the tax exemption for the income of the and the end of the mandatory adoption of the taxation regime based on real for companies in the real estate sector.
“We had a good dehydration of the original bill. The text was full of critical points. Now we had a very large reversal and we see the balance as positive,” said the lawyer in an interview with EXAM Invest.
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For the tax lawyer, the changes show that the government chose the workhorses for the fight: the correction of the Income tax for individuals (the increase in the exemption ceiling for workers earning up to 2,500 reais per month was maintained, against the current limit of 1,900 reais) and the taxation of 20%. “The finer points have been removed,” he said.
Among the improvements, she highlights:
- Maintaining the possibility of goodwill deductibility (the difference between a company’s book equity and what it actually pays in an acquisition);
- The non-mandatory option for real profit for real estate, rental companies and malls;
- Exemption from taxation on the profitability of real estate funds (FIIs) and funds from agribusiness;
- the end of about in infrastructure, agribusiness and logistics.
“It was clear that it would be unfeasible to pass all those controversial measures, especially in the time we have for this discussion, the second semester. The government removed these topics, focused on dividends and addressed some issues,” he pointed out.
Reduction of the IRPJ rate
In the lawyer’s view, the corporate tax cut of five percentage points proposed in the previous text was “very timid” compared to the 20% tax on profits and dividends. “Now, the rate reduction was bolder, with a 12.5 pp cut by 2023”.
According to the new text, the IR rate for companies drops from the current 15% to 2.5% by 2023, compared to the previous reduction to 10%. The additional 10% for profits above 20 thousand reais per month was maintained. There is still another 9% that remain unchanged from the Social Contribution on Net Income (CSLL).
“It is difficult to look at the taxation of dividends decoupled from the IRPJ rate. As it was, the text discouraged industrial activity itself. It is certainly a bill that will have a very different starting point for the debate from this one on. moment”, evaluates.
The rapporteur of the reform said on Tuesday that the new version of the project will reduce the federal tax collection by 30 billion reais. The government’s original proposal foresaw a revenue increase of 6.15 billion reais between 2022 and 2024, according to data from the Federal Revenue.
Still critical points
Still, Tatiana signaled that the project needs further analysis. “It still has rough edges to be cut, like the part that deals with equity investment funds (FIPs)”, he highlighted.
FIPs are closed-end investment vehicles used primarily by the industry. private equity for fundraising abroad. Under the current rule, non-resident investors in Brazil who invest in these funds are exempt from taxation, as long as they comply with some requirements, including that they do not hold, alone or together with other people related to them, more than 40% of the of funds.
“There is a discussion today in the Revenue about the structure of these funds, whether shareholders of funds managed by the same manager are related parties – which would result in the loss of exemption – or not”. The bill clarifies this issue, pointing out that the shareholders of these funds are not considered people connected just because they are administered or managed by the same manager or equivalent. The problem, however, is that it brings a time cut, explained the lawyer.
The text considers this understanding “as of January 1, 2022”. “It seems to resolve the issue with clarification, but it creates a lot of legal uncertainty about what happened before that date,” commented Tatiana.
For her, another point that also needs more clarity is about the dividends on companies of the same group.
In this case, she said that the new version removes the incidence of taxation on profits or dividends distributed to a legal entity domiciled in Brazil that is the controlling shareholder or that is under common corporate control, which is positive, but does not cover the distribution to investee companies .
“Shouldn’t we have a more flexible rule also for these cases? There are countries that adopt a minimum investment. If you have up to 10%, for example, of this company, there would be no exemption”. For the lawyer, these questions do not detract from the initial positive assessment, but highlight the need for a better discussion on some points in the text.