Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

September 5, 2023

Brazil modifies how investment funds will be taxed

  • A new provisional measure makes changes to how closed-ended and some specific investment funds in Brazil will be taxed.
  • Key changes include a periodic withholding taxation mechanism for unrealized gains on a semi-annual basis instead of upon the liquidation of the investment.
  • The new rules should enter into force on 1 January 2024; however, the provisional measure needs to be converted into Federal law by the Brazilian Congress within a certain period to become permanent or it will lose its effect.

Provisional Measure1 1,184/23 (PM), published on 28 August 2023, makes changes in the taxation of investment funds in Brazil and introduces a periodic taxation mechanism for closed-end and exclusive funds (come-cotas).

Key changes introduced by the PM include:

1. Introduction of periodic taxation (come-cotas) for closed-end funds

  • 20% for short-term funds, with taxation ranging from 22.5% to 15% on liquidity events
  • 15% for long-term funds, with taxation ranging from 22.5% to 15% on liquidity events

Withholding income tax (WHT) will be charged in May and November of each year.

2. Responsibility of the fund administrator for the WHT on disposal of quotas

Upon disposal of shares, the shareholder, if requested by the administrator, must pay the WHT in advance. The disposal will be prohibited if the administrator does not have the necessary financial resources to fulfill the tax obligation.

3. Investment funds subject to specific regimes: Private equity funds (FIPs), stock funds (FIAs) and exchange-traded funds (ETFs), with the exception of fixed-income ETFs and funds investing at least 95% of their net worth in these funds

The income earned in these funds, if they are classified as investment entities and meet criteria related to their investment portfolio composition, will be taxed exclusively on liquidity events at a rate of 15%.

Investment entities must meet the following requirements:

  • Have a professional management structure at the fund or shareholder level, when organized as funds or investment vehicles, in Brazil or abroad
  • Be represented by managers or service providers with the authority to make investment and divestment decisions at their discretion, with the purpose of generating returns through capital appreciation, income, or both
  • Comply with regulatory requirements set by the National Monetary Council — CMN

4. FIPs, FIAs, ETFs, and funds of funds not classified as investment entities

If the funds do not meet the requirements for classification as investment entities, they will be subject to WHT at a rate of 15%, under the periodic taxation (come-cotas) regime and the same rate on liquidity events.

Positive or negative income resulting from the valuation or devaluation of shares or stocks issued by Brazilian legal entities representing control or affiliation of entities invested by the fund's portfolio may be excluded from the periodic taxation (come-cotas) calculation base, provided the accounting requirements are met.

5. Transition

The unrealized gains earned through 31 December 2023, in previously non-subject closed-end funds will be taxed according to the rules below, at the taxpayer's option:


Tax rate

Payment base

Payment form

Payment due

Option 1


Income earned through 31 December 2023

24 installments plus interest

31 May 2024

Option 2


Income earned through 30 June 2023

Four installments

29 December 2023

Income earned from 1 July 2023 through December 31 2023

Single installment

31 May 2024

For private equity funds/stock funds/ETFs that do not qualify as investment entities (item 4, above), earnings controlled in sub-accounts may be excluded from the calculation base.

Closed-end investment funds that explicitly provided, as of the date of the Provisional Measure, for their extinction and irrevocable liquidation by 30 November 2024, will not be subject to come-cotas.

6. Merger, split or transformation

The merger, split or transformation of investment funds will be taxable events as follows:

  • Events occurring through 31 December 2023 will not be taxable, provided that: (i) the fund is not subject to periodic taxation (come-cotas) in 2023, and (ii) the tax rate to which its shareholders are subject in the resulting fund operation is equal to or higher than the rate to which they were subject immediately preceding the operation.
  • Events occurring from 1 January 2024 will be taxable events, except when involving funds listed in item 3, above (funds not subject to come-cotas).

7. Non-Resident Investors (INR)

A 15% tax rate on income will apply, with the exception of stock funds, subject to a 10% rate (15% for investors located in jurisdictions with favorable taxation).

The PM does not change the treatment of INR investments in Public Bond Investment Funds, FIPs, Emerging Business Investment Funds (FIEE), or investment funds with shareholders exclusively resident or domiciled abroad, as per article 97 of Law No. 12,973 of 13 May 2014.

8. Funds subject to the previous regime

In addition to those already mentioned, the following funds remain subject to the previous regime:

  • Real Estate Investment Trusts (REITs) and Investment Funds in Agro-Industrial Production Chains (FIAGRO)
  • Infrastructure Investment Funds — FIP-IE and Investment Funds in Intensive Economic Research, Development, and Innovation (FIP-PD&I)
  • Investment funds covered by Law No. 12,431 of 24 June 2011

9. Other changes

REITs (Fundo de Investimento Imobiliário or FII) and FIAGRO must have at least 500 shareholders for income to be taxed at a 0% rate (previously the requirement was 50 shareholders).

The tax treatment in cases of usufruct will consider the beneficiary of the income, even if they are not the owner of the investment.

Different tax treatment will be applied to each class of shares if investment funds have different share classes with distinct rights and obligations and segregated assets.


For additional information with respect to this Alert, please contact the following:

EY Assessoria Empresarial Ltda, São Paulo

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor



1 Provisional measures are a type of Decree, signed and published by the President, with the power of law that needs to be approved by the Congress within 60 calendar days from publication (extendable by another 60 calendar days) to be enacted as a Federal law.


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more