In a session held on June 1, the National Congress overturned important presidential vetoes to Bill No. 5191/2020, approved and converted into Law No. 14,130/2021, which established the Agroindustrial Chain Investment Funds (“FIAGRO”).
FIAGRO will be used to invest in assets linked to the agribusiness sector, such as rural properties, shares in companies that carry out activities that are part of the agro-industrial production chain, financial assets, credit instruments or securities issued by individuals and legal entities that are part of the agro-industrial production chain, credit rights, among others.
Following the Real Estate Investment Fund (FII) model, the legislation guarantees exemption from income tax withheld at source (“IRRF”) on income distributed to individual investors who hold less than 10% of FIAGRO shares, with at least 50 shareholders, traded on stock exchanges or organized over-the-counter markets.
Another relevant benefit concerns the non-taxation at source on income from FIAGRO investments in Agricultural Deposit Certificates (CDA), Agricultural Warrants (WA), Agribusiness Credit Rights Certificates (CDCA), Agribusiness Credit Letters (LCA), Agribusiness Receivables Certificates (CRA), and Rural Product Notes (CPR).
Finally, a difference between FIAGRO and FII is the possibility of deferring income tax resulting from the capital gain obtained from the payment of fund shares with rural property until the time of redemption or sale of the shares, allowing payment at the historical cost or accounting value of the rural property.
This differentiated tax treatment is a fundamental aspect of FIAGRO's attractiveness, in order to enable its main objective to be achieved, which is to expand the means of financing for the agricultural sector in Brazil. The expectation with this new Fund is to encourage the entry of rural producers into the financial market, stimulating the raising of resources for agribusiness.
Finally, it is important to mention that the approved text will be submitted for presidential promulgation. In addition, FIAGRO will need to be regulated by the Brazilian Securities and Exchange Commission (CVM), the regulatory body for the Brazilian capital markets.
