Brazil: Infrastructure Investments In Brazil - Recent Highlights

1. Brazilian economic growth, together with the upcoming sporting events - the 2014 FIFA World Cup and the 2016 Olympic Games -, strongly encouraged the Federal Government to enact a number of measures to boost the infrastructure's development.

2. In order to enhance fund raising mechanisms for long-term financing, special securities providing beneficial tax regimes were created as a result of Federal Law No. 12,431/2011, as recently amended by Federal Law No. 12,715 – signed on September 17, 2012 -, and regulated by Presidential Decree No. 7,603/2011.

3. The securities created by Federal Law No. 12,431/2011 comprise: (i) investment project securities ("GIS"), including certificates of real estate receivables ("CRI"), structured for investment projects ("CRI-Project"); (ii) priority projects bonds (including infrastructure bonds), issued until December 31, 2015 ("IBs"); and (iii) priority projects bonds funds ("IBF") (collectively, the "Long-Term Securities").

4. Securities issued by non-financial institutions for public offering, as regulated by the Brazilian Securities and Exchange Commission ("CVM"), are qualified as GIS, provided the following items are complied with: (i) predetermined interest rates only, linked to a price index or referential rate, not being permitted any adjustment of interest at post-fixed rate; (ii) weighted average maturity term higher than 4 years; (iii) Interest payment within intervals of, at least, 180 days; (iv) no repurchase option by the issuer or its related parties in the first 2 years after the offering, nor call option or prepayment by the issuer, except as provided for in a regulation to be enacted by the National Monetary Council ("CMN"); (v) no provision requiring the investor to resell the securities; (vi) evidence of registration of the GIS or CRI-Project with systems duly authorized by the Central Bank of Brazil or the CVM, as applicable; and (vii) simplified procedure evidencing commitment to allocate the proceeds in future payments related to the investment projects or reimbursement of expenses, costs or debts related to investment projects, incurred up to 24 months prior to the closing of the securities offering.1

5. IBs constitute a type of GIS, and are required to comply with other issuer- and use of proceeds-related requirements, namely: (i) issuance by a special purpose company ("SPC"), or its holding company, dedicated to implement a priority investment project, and utility companies ("Issuer").

Funds raised by offerings of IBs need to be used for future financing of priority investment projects in infrastructure or research, development and innovation, or reimbursement of expenses, costs or debts related thereto, incurred up to 24 months prior to the closing of the securities offering. Eligibility to a priority status depends on issuer presenting a request for approval of the investment project by the competent Ministry.

6. Shares issued by an IBF are also subject to a special regulation and taxation regime established by Federal Law No. 12,431/2011, as amended. An IBF needs to be incorporated by asset managers authorized to operate as such by the CVM, and to comply with specific portfolio requirements, until 180 days as from its incorporation, to wit: (i) at least 67% of its net equity must be invested directly in IBs, for the first two years following the closing date of the public offering of shares representing the fund's initial net equity; and (ii) at least 85% must be invested in IBs after the first two years.

7. Federal Law No. 12,431/2011 created a special tax regime for investments in Long-Term Securities.

GIS and CRI-Project – Exclusive for Non-Resident Investors

The taxation described below to non-resident investors applies to those registered as per CMN Resolution 2,689, not located at a jurisdiction that does not tax income, or taxes it at a maximum rate lower than 20% (Low Tax Jurisdictions – "JTL") ("Non-Resident Investors").

(i) Income tax ("Income Tax"):

(a) 0% rate on interests produced by: (1) GIS or CRI-Project; and (2) shares of local investment funds, when such funds are exclusively designed to non-resident investors and invest, at least, 85% of their portfolio in GIS and/or CRI-Project, and this minimum threshold is of 67% in the first two years following the closing date of the public offering of shares.

(b) 0% rate on capital gains related to the trading of GIS and/or CRI-Project on local exchanges.

(ii) Tax on foreign exchange transactions ("IOF-FX"): 0% rate.

IBs and IBFs – Applicable to Domestic and Non-Resident Investors.

(i) Income Tax:

(a) 0% rate on interests produced by IBs and IBFs applies to resident individuals and Non-Resident Investors;

(b) 15% rate on interests produced by IBs and IBFs applies to Brazilian companies;

(c) rate of: (1) 0% on capital gains made by Non-Resident Investors and individuals related to the trading of IBs; and (2) 15% on capital gains made by companies related to the trading of IBs.

(d) rate of: (1) 0% on capital gains made by Non-Resident Investors related to the trading of shares issued by IBFs on local organized securities markets; and (2) variable on capital gains made by resident investors related to the trading of shares issued by IBFs.

(ii) IOF-FX: 0% rate.

8. Considering that attractiveness for Long-Term Securities are tax-related, their issuers, and not investors, are subject to penalty in case the funds are not allocated to the related project, as provided for Federal Law 12,715/2012. Such penalty equals to 20% of the total amount of funds not invested in the related project, and is due to the Brazilian Federal Revenue Service.

Footnotes

1 One of the main amendments brought by Federal Law No. 12,715/2012 is to expressly authorize use of funds raised by means of an offering of GIS, CRI-Project and IBs for reimbursement of expenses, costs or debts related to investment projects, incurred up to 24 months prior to the closing that of the securities offering.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.