The investment funds market in Brazil is very active and has become more sophisticated in the last decade – especially with the enactment of CVM Resolution 175 of 23 December 2022, which changed the regulatory framework applicable to investment funds in Brazil, and CVM Resolution 214 of 30 September 2024, which amended CVM Resolution 175 and created a specific regulation for agribusiness investment funds.

The rise in the interest rate in the last couple of years, following a rise in inflation, has caused retail investors to avoid risks with variable income investments, leading to further investment in fixed income assets.

In 2022, Brazil held the fourth position on closed-ended funds and the seventh position on open-ended funds, according to IOSCO’s ranking of jurisdictions by biggest aggregate net asset value (NAV) in its latest Investment Funds Statistics Report.

According to the Brazilian Financial and Capital Markets Association (ANBIMA, a private and voluntary self-regulatory association), the consolidated net equity of Brazilian investment funds amounted to BRL10.8 trillion as of September 2025.

Between investor capitalisations and redemptions, funds in Brazil amassed net positive investments of BRL165.8 billion from January through October 2025 (a 36% increase in comparison to all of 2024), with fixed income funds, FIDCs and FIPs contributing positively the most (BRL180.8 billion, BRL59.2 billion and BRL51.1 billion, respectively) and multimarket and stock funds representing the biggest exits (BRL55.5 billion and BRL52.8 billion, respectively).

With the Brazilian government signalling the continuation of high basic interest rates, the outlook for 2026 is positive for fixed income investments.

The changes promoted by CVM Resolution 175 and recent tax reforms, which also brought beneficial changes for foreign investors, are expected to positively impact the investment fund industry in both the short and long terms.

CVM Resolution 175 represents an important milestone for the evolution of the fund industry in Brazil. It aims to reduce bureaucracy and costs, and to increase security for investors, bringing the industry closer to practices adopted in other jurisdictions. Key changes include limiting investor liability to amounts invested, creating different classes of quotas with segregated portfolios, and applying general insolvency rules to the investment funds (ie, investment funds are directly responsible for their legal and contractual obligations).

Each alternative fund is allowed to invest in certain types of assets, as provided by its specific regulation. For types of investments and the applicable regulation for each alternative fund, please see 2.1.1 Fund Structures and 2.3.1 Regulatory Regime.

Under Brazilian regulations, investment funds must engage a custodian duly authorised by CVM, which will be responsible for managing the bookkeeping of the investment fund’s assets. FIIs are exempt from this rule for financial assets not exceeding 5% of the fund’s net equity, provided they are admitted for trading on a stock exchange or organised over-the-counter market, or are registered in a registration or financial settlement system authorised by the Central Bank of Brazil or CVM.

The main regulations regarding risk, borrowing restrictions and the valuation and pricing of the assets held by investment funds are set up by CVM Resolution 175, as described in 3.4 Operational Requirements.

In addition to the rules applicable to funds in general, Normative Annex IV of CVM Resolution 175 provides that FIPs that obtain direct financial support from development agencies are authorised to contract loans directly from such development agencies, limited to an amount corresponding to 30% of the FIP’s assets. Furthermore, the FIP’s administrator and asset manager may contract a loan on behalf of the fund only in cases authorised by CVM (in practice, a consultation must be submitted to CVM requesting authorisation for such borrowing) or to cover the default of quotaholders who have not paid their subscribed quotas. This latter case also applies to classes of quotas marketed to qualified or professional investors of all other fund categories as set forth in CVM Resolution 175.

As for FIDCs, the administrator may not currently borrow or grant loans on behalf of the fund, except in the context of transactions carried out in the derivatives market.

FIIs are not currently allowed to borrow or grant loans. They may borrow their equities and securities, provided that such loans are processed exclusively through services authorised by the Brazilian Central Bank or CVM, or are to provide guarantees for their own operations.

In addition, for each type of alternative fund, CVM regulates the accounting standards for the recognition, classification and measurement of assets and liabilities, and those for valuation, pricing and revenue recognition, the appropriation of expenses and the disclosure of information in the financial statements for each investment fund, which are expressly provided by:

• CVM Instruction 579 of 30 August 2016, for FIPs;
• CVM Instruction 489 of 14 January 2011, for FIDCs; and
• CVM Instruction 516 of 29 December 2011, for FIIs.

Under Brazilian law, insider dealing and market abuse are illegal activities subject to administrative, civil and criminal sanctions. CVM penalties for such activities include warnings, fines, suspension or even prohibition from trading in the capital markets.

Please see 2.4 Operational Requirements.

An investment fund in Brazil does not have a formal corporate existence and is classified solely as a flow-through entity. As such, it is not considered a legal entity for tax purposes and is not regarded as a taxpayer from a legal standpoint. Investment funds benefit from a special income tax treatment that typically allows for a deferral of taxes on any gains accrued by the fund’s portfolio.

In this context, an investment fund can invest in different assets, be remunerated by such investment, and/or sell its investments, and none of those gains will be taxable at the fund level. Such gains will only be taxed (if ever) at the level of the investors whenever certain specific events are verified (eg, the amortisation of quotas, the redemption of quotas or the liquidation of the fund).

In addition to these income tax matters, in light of the implementation of the Consumption Tax Reform in Brazil, investment funds may be subject to a specific treatment for Brazilian indirect tax purposes, depending on the nature of their investments and their qualification as investment entities.

Income Taxation

FIPs

Pursuant to Law 11,312, gains and earnings obtained by the investors of a FIP whose portfolio is compliant with CVM regulations are generally subject to withholding income tax (WHT) at a 15% rate.

Nonetheless, Law 11,312 establishes a specific tax treatment applicable to foreign investors who invest in an FIP by means of the mechanisms provided for by Resolution 13, jointly issued on 3 December 2024 by the National Monetary Council and the Central Bank of Brazil, provided certain requirements are met. Under this specific tax treatment, gains and earnings recognised by foreign investors that are neither resident nor domiciled in low-tax jurisdictions as a result of the amortisation, redemption or sale of the FIP’s quotas are subject to WHT at a 0% rate.

Foreign investors of an FIP that are residents of or domiciled in low-tax jurisdictions (as per the concept provided by Brazilian tax law) are not entitled to the special tax treatment set out above, and are therefore subject to 15% WHT on gains and earnings deriving from the investment in the fund.

The legal requirements to avail of the specific tax treatment afforded to foreign investors have been significantly changed by Law 14,711, enacted on 30 October 2023. The legal requirements originally set forth by Law 11,312 and those set forth by Law 14,711 for applying the specific tax regime are as follows.

Residence of investors

• Original legal requirement under Law 11,312: quotaholders domiciled or resident in a low tax jurisdiction, as defined by Brazilian legislation, did not benefit from the special regime.
• New requirement under Law 14,711: quotaholders that are domiciled or resident in a low-tax jurisdiction still cannot benefit from the special regime (with an exception for sovereign funds).

FIP portfolio

• Original legal requirement under Law 11,312: at least 67% of the FIP’s portfolio should be represented by shares of corporations (SA), convertible debentures or warrants, and at no time could the FIP have debt bonds equal to or higher than 5% of its net assets (not including public bonds or convertible securities).
• New requirement under Law 14,711: a FIP’s portfolio shall observe CVM regulations.

40% Test

• Original legal requirement under Law 11,312: the foreign investor should not hold, directly or via related parties, more than 40% of the quotas of the FIP, nor be entitled to receive more than 40% of the FIP’s earnings. Such requirements were cumulative with the 90% Rule. If those requirements were not met, gains and earnings received by foreign investors of the FIP were subject to WHT at a 15% rate.
• New requirement under Law 14,711: the 40% Test was revoked. The foreign investor of the FIP can now hold any percentage of the fund’s quotas or be entitled to receive any percentage of the FIP’s earnings to benefit from the regime, provided all the other requirements are met.

Investment entity

• Original legal requirement under Law 11,312: there was no provision requiring the FIP to qualify as an investment entity for the foreign investors of the FIP to benefit from the special regime.
• New requirement under Law 14,711: the special regime only applies to foreign investors of FIPs that qualify as an investment entity, based on the rules defined by the National Monetary Council.

Finally, Law 14,754 modified the tax regime applicable to funds in general, and introduced come-cotas taxation for closed funds, under which earnings arising from the fund’s portfolio are to be subjected to WHT in May and November of each calendar year (regardless of any effective distribution to the quotaholders). There are certain exceptions, however, including that FIPs that qualify as investment entities and comply with the portfolio composition requirements established by CVM are not subject to such regime.

FIP-IEs

Law 11,478 provides that any income (including capital gains) received by Brazilian individuals from FIP-IEs benefits from 0% WHT, provided that the general legal requirements for 0% benefits are met (ie, the requirements applicable to FIP-IEs – see 2.1.1 Fund Structures).

Legal entity quotaholders of a FIP-IE are subject to WHT at a rate of 15% on the income earned upon the redemption and amortisation of quotas and in the case of liquidation of the fund or the sale of the quotas. For foreign investors, the same specific tax treatment afforded to FIPs applies to FIP-IEs. The original tax treatment applicable to foreign investors in FIP-IEs was also changed by Law 14,711.

FIDCs

Gains derived by quotaholders of an FIDC upon distributions by the fund are subject to WHT.

Law 14,754 established the following.

• If the FIDC has a portfolio composed of at least 67% credit rights (“Diversification Rule”), gains arising from the investment in the FIDC shall be subject to WHT at a general 15% rate.
• If the FIDC adheres to the Diversification Rule and qualifies as an investment entity according to the regulations set by the National Monetary Council, its investors will not be subject to come-cotas taxation. In this case, the 15% WHT will only be applicable upon the actual distribution of income, the amortisation or the redemption of quotas.

On the other hand, if the FIDC follows the Diversification Rule but does not qualify as an investment entity, different rules apply. In this scenario, quotaholders will face mandatory come-cotas taxation, and a 15% WHT will be imposed in May and November of each year on the income and gains accrued up to those dates. This tax will also apply upon the investor’s actual redemption or amortisation of the quotas, whichever comes first.

If the Diversification Rule is not met, the general rule is that gains arising from the investment in the FIDC shall be subject to WHT at regressive rates from 22.5% to 15%, depending on whether the fund is qualified as a long-term investment (if the FIDC portfolio has a term of more than 365 days) or a short-term investment (if the FIDC portfolio has a term of less than 365 days), as follows.

• Long-term investment:
1. 22.5% rate – investment term up to 180 days;
2. 20% rate – investment term from 181 days to 360 days;
3. 17.5% rate – investment term from 361 days to 720 days; and
4. 15% rate – investment term above 720 days.
• Short-term investment:
1. 22.5% rate – investment term up to 180 days; and
2. 20% rate – investment term above 180 days.

As the FIDC that does not comply with the Diversification Rule is not subject to the specific tax treatment provided for by Law 14,754, it is subject to the general rule of come-cotas provided by said legislation, which applies as follows.

• Long-term investment: mandatory imposition of come-cotas and subjection of the accrued earnings of the investor to WHT at a 15% rate in May and November of each year or at the date of the effective redemption or amortisation of the quotas, whichever occurs first.
• Short-term investment: mandatory imposition of come-cotas and subjection of the accrued earnings of the investor to WHT at a 20% rate in May and November of each year or at the date of the effective redemption or amortisation of the quotas, whichever occurs first.

In respect of non-resident investors, the WHT treatment of income and gains arising from the investment in FIDCs shall vary, as follows:

• for a non-resident investor that is not located in a low-tax jurisdiction: WHT at a flat 15% rate, without come-quotas taxation; and
• for a non-resident investor located in a low-tax jurisdiction: WHT at a flat 15% rate, with come-cotas taxation.

Legal entities that invest in FIDCs should consider WHT as an anticipation to corporate income tax (IRPJ), whilst the WHT levied on the income and gains derived by individuals and non-resident investors of the FIDC is definitive.

In addition to WHT for the investor, open-ended funds also incur a tax on financial transactions (IOF/Títulos) if the redemption of the fund’s quotas occurs before the 30th day of investment on a regressive rate basis. The primary acquisition of FIDC quotas is now also subject to IOF/Títulos, at a 0.38% rate.

FIIs

Under Law 8,668, an FII must distribute its results to its quotaholders twice a year.

The taxation of an FII’s accrued gains only occurs at the investor’s level, and the respective treatment will depend on the investor’s location. There is one exception to this rule: Law 8,668 establishes that FIIs investing in any real estate enterprise that has a quotaholder holding (individually or jointly with an affiliate) more than 25% of the quotas of the FII as a developer, constructor or partner will be taxed as a legal entity.

The gains upon distributions by the FII and the gains derived from the sale of the FII’s quotas are generally subject to WHT at a 20% rate. Gains upon distributions made to and gains derived from the sale of the quotas by beneficiaries not located in low-tax jurisdictions that invest in Brazil via the mechanics of Resolution 13 are subject to WHT at a 15% rate.

However, if the FII’s quotas are publicly traded and the quotas are sold within the stock exchange, gains earned by foreign investors not located in low-tax jurisdictions would be subject to WHT at a rate of 0%. Applying the 0% WHT to a sale performed within an over-the-counter market is controversial.

In respect of Brazilian individuals, an investor’s gains are exempt when the quotaholder holds less than 10% of the fund’s quotas or is entitled to receive less than 10% of the fund’s total income, provided that the FII has at least 100 quotaholders and its quotas are traded exclusively on the stock exchange or organised over-the-counter market. Furthermore, Law 14,754 has amended the provisions of Law 11,033 to establish that this tax exemption does not apply to a group of individuals that qualify as related parties if they jointly own 30% or more of the FII’s quotas or if they are entitled to receive earnings that represent more than 30% of the total gains of the FII.

FIAGROs

The tax treatment applicable to FIIs and FIAGROs is mainly provided by the same piece of legislation – Law No 8,668/93 – and there are similarities between the taxation of both funds. Despite the similarities, their underlying tax impacts are not identical.

Section 16 of Law No 8,668/93 sets forth that income and capital gains earned by FIAGROs are exempt from IOF and income taxation. This exemption is not applicable to income and net gains earned by the FIAGRO in variable or fixed income investments, which are subject to WHT in accordance with the rules applicable to legal entities, depending on the characteristics of the investment. The exception is not applicable to certain types of assets, such as Agricultural Depositary Receipts (CDA), Agricultural Warrants (WA), Agribusiness Receivable Certificates (CRA), Agribusiness Credit Letters (LCA) and Rural Product Notes (CPR) – income and net gains arising from the investment in these assets is still exempt from income tax.

As a general rule, returns distributed by the FIAGRO to its investors are subject to WHT at a 20% rate. Capital gains and income earned in the sale or redemption of a FIAGRO’s quotas are also generally subject to WHT at a 20% rate.

FIAGRO investors that are individuals based in Brazil are also subject to the income tax exemption rule that applies to FIIs: an investor’s gains are exempt when the quotaholder holds less than 10% of the fund’s quotas or is entitled to receive less than 10% of the fund’s total income, provided that the FII has at least 100 quotaholders and its quotas are traded exclusively on the stock exchange or organised over-the-counter market. This tax exemption does not apply to a group of individuals that qualify as related parties if they jointly own 30% or more of the FIAGRO’s quotas or if they are entitled to receive earnings that represent more than 30% of the total gains of the FIAGRO.

Instead of using only cash, investors are allowed to pay-in FIAGRO quotas (as capital injection) with goods and rights. If the quotas are paid-in with rural property, the income taxation of any capital gains that may arise with the transfer may be deferred until the date on which the quotas are sold, or upon their redemption in the event of the fund’s liquidation.

In connection with foreign investors specifically, gains upon distributions made to and gains derived from the sale of the quotas by beneficiaries not located in low-tax jurisdictions that invest in Brazil via the mechanics of Resolution 13/2024 are subject to WHT at a 15% rate.

However, if the FIAGRO’s quotas are publicly traded and the quotas are sold within the stock exchange, gains earned by foreign investors not located in low-tax jurisdictions would be subject to WHT at a rate of 0%. Applying the 0% WHT to a sale performed within an over-the-counter market is controversial.

Tax on Goods and Services (IBS) and Contribution on Goods and Services (CBS)

In 2023, the Brazilian Congress approved the Consumption Tax Reform by means of Constitution Amendment (EC) No 132/2023, which instituted IBS and CBS as substitutions for the indirect taxes that are currently due from taxpayers in Brazil. This amendment was recently regulated by Complimentary Law (LC) No 214/2025, enacted on 16 January 2025.

Before the enactment of LC No 214/2025, investment funds were not subject to indirect taxation. However, this piece of legislation sets forth certain scenarios in which investment funds shall be subject to the collection of IBS and CBS. As per the current wording of LC No 214/2025, as a rule, investment funds shall not be considered taxpayers for IBS and CBS purposes. Nonetheless, investment funds that prepay receivables (such as FIDCs), if they are not qualified as investment entities, must collect IBS and CBS upon their activities under the specific financial services regime.

Therefore, even though investment funds are not taxpayers for income tax purposes (ie, only investors are taxed), funds that prepay receivables may be considered IBS and CBS taxpayers if they are not qualified as investment entities.

From the quotaholders’ standpoint, investors whose economic activity comprises investment in funds shall also collect IBS and CBS on the funds’ results that they receive. Conversely, non-professional investors (ie, individuals and legal entities that do not invest in funds as part of their economic activity) shall not be subject to the collection of IBS and CBS on the funds’ results received by them.

Although these provisions have already been approved by the Brazilian Congress and enacted by the President, they may still be subject to change in the future: there is another Bill of Law (PLP No 108/2024) whose analysis is pending by the Congress, which suggests that FIIs and FIAGROs that do not meet the basic criteria not to be taxed for income purposes, among other requirements, are also considered IBS and CBS taxpayers. If PLP No 108/2024 is approved, the activity developed by these investment funds may be subject to IBS and CBS taxation if the legal requirements for exemption are not met.

The Consumption Tax Reform is being gradually implemented until 2033, which will be the first year in which IBS and CBS shall be exclusively charged, in full substitution of the currently applicable indirect tax regime. As a general rule, these taxes will begin to be symbolically charged by tax authorities at a 1% combined rate in 2026, in addition to the currently applicable indirect taxes (taxpayers that comply with certain ancillary obligations may be exempted from this initial charge).

As described in 3.1.1 Fund Structures, each retail fund is allowed to invest in certain types of assets.

Like alternative funds, retail funds must also engage a custodian, which shall be an entity duly authorised by CVM.

Upon becoming quotaholders, all investors must confirm, through the formalisation of an adhesion and risk acknowledgement term, that they had access to the entire content of the by-laws and the essential information sheet, if applicable, and that they are aware of the risk factors related to the fund.

The administrator and the asset manager are not allowed to borrow or grant loans on behalf of the fund, except in cases authorised by CVM or specific cases set forth in the regulations (see 2.4 Operational Requirements). Investment funds may use their assets to provide guarantees for their own operations, and may lend and borrow financial assets, provided such loan operations are processed exclusively through services authorised by the Brazilian Central Bank or CVM.

The fiduciary administrator is required to have a manual regarding its valuation practices for both liquid and illiquid assets available on its website. All investment funds must also follow international accounting standards.

ETFs may carry out lending transactions regarding the securities of the portfolio in the manner regulated by CVM and under the limits and conditions set forth in the ETF’s by-laws.

Resolution CVM 175 sets forth the possibility of the manager/administrator borrowing to cover for negative equity of a class of quotas.

Please see 3.4 Operational Requirements.

As investment funds do not have legal personality and are not subject to taxation on income and gains derived from their portfolio, no taxes are due at the fund level. Taxation shall occur at the level of the investors only and not to the fund itself.

In light of the implementation of the Consumption Tax Reform in Brazil, investment funds may also be subject to a specific treatment for Brazilian indirect tax purposes, depending on the nature of their investments and their qualification as investment entities.

Income Taxation

The definition of the tax treatment applicable to the quotaholder is contingent upon the verification of the nature of the investment fund (eg, ETF, FIP, FIF), and of the characteristics of the investor itself (Brazilian individual or legal entity; if the foreigner is either resident or domiciled in a low-tax jurisdiction or not, etc).

Generally speaking, the earnings arising from the redemption or amortisation of quotas of Brazilian investment funds are subject to WHT at regressive rates, depending on whether the fund is qualified as a long-term investment (if the fund portfolio has a term of more than 365 days) or a short-term investment (if the fund portfolio has a term of less than 365 days), as follows.

• Long-term investment:
1. 22.5% rate – investment term of up to 180 days;
2. 20% rate – from 181 days up to 360 days;
3. 17.5% rate – from 361 days up to 720 days; and
4. 15% rate – investment term over 720 days.
• Short-term investment:
1. 22.5% rate – investment term of up to 180 days; and
2. 20% rate – investment term over 180 days.

In respect of such general tax treatment, Law 14,754 introduced the come-cotas taxation, which has been in force since 1 January 2024 for both closed-ended and open-ended funds. The general rule of come-cotas provided by said legislation is as follows.

• Long-term investment: the mandatory imposition of come-cotas and subjection of the accrued earnings of the investor to WHT at a 15% rate in May and November of each year or at the date of the effective redemption or amortisation of the quotas, whichever occurs first.
• Short-term investment – the mandatory imposition of come-cotas and subjection of the accrued earnings of the investor to WHT at a 20% rate in May and November of each year or at the date of the effective redemption or amortisation of the quotas, whichever occurs first.

Legal entities that invest in funds should consider WHT as an anticipation to corporate income tax (IRPJ), whilst the WHT levied upon the income and the gains derived by individuals and non-resident investors of the fund is definitive.

In addition to WHT for the investor, for open-ended funds there is also a tax on financial transactions (IOF/Títulos) if the redemption of the fund’s quotas occurs before the 30th day of investment on a regressive rate basis.

Specific considerations may apply to specific types of funds, such as ETFs, as outlined below.

ETFs

Brazilian law distinguishes variable income ETFs from fixed income ETFs, as follows:

• a fixed income ETF is qualified as such for tax purposes if it invests at least 75% of its net worth in financial assets that are covered or referenced by the underlying fixed income index; and
• a variable income ETF is qualified as such for tax purposes if its portfolio comprises stocks also covered by the underlying index.

Under Law 14,754, the following tax treatment applies to variable income ETFs that comply with the portfolio allocation, classification and reclassification requirements set out in the CVM regulations and have quotas that are effectively traded on a stock exchange or organised over-the-counter market in Brazil: gains arising from the investment in the ETF shall be subject to WHT at a general 15% rate.

If the ETF is deemed to be an investment entity under the rules of the National Monetary Council, its investors shall not be subject to the come-cotas taxation, and the 15% WHT shall only be due upon the date of the effective distribution of income, amortisation or redemption of quotas.

Conversely, if the ETF does not qualify as an investment entity, the following rules will apply: quotaholders will be subject to mandatory come-cotas taxation, and a 15% withholding tax will be imposed in May and November of each year on the income and gains accrued up to those dates. This tax will also apply upon the investor’s actual redemption or amortisation of the quotas, whichever occurs first.

Variable income ETFs that do not comply with the portfolio allocation, classification and reclassification requirements provided for by CVM are subject to the general rule of come-cotas provided by Law 14,754, which applies as follows.

• Long-term investment – the mandatory imposition of come-cotas and subjection of the accrued earnings of the investor to WHT at a 15% rate in May and November of each year or at the date of the effective redemption or amortisation of the quotas, whichever occurs first.
• Short-term investment – the mandatory imposition of come-cotas and subjection of the accrued earnings of the investor to WHT at a 20% rate in May and November of each year or at the date of the effective redemption or amortisation of the quotas, whichever occurs first.

As expressly provided by Law 14,754, fixed income ETFs are not subject to the overall come-cotas regime. The gains and income arising from an investment in a fixed income ETF are taxed at the following rates upon the effective redemption or amortisation of the quotas:

• 25% rate – investment term of up to 180 days;
• 20% rate – investment term from 181 days up to 720 days; and
• 15% rate – investment term of over 720 days.

Gains on the disposal or redemption of quotas of a fixed-income ETF are calculated using the same rates as applied to distributions.

Tax on Goods and Services (IBS) and Contribution on Goods and Services (CBS)

As part of the Consumption Tax Reform, LC No 214/2025 sets forth certain exceptions in which investment funds can be considered taxpayers for IBS and CBS purposes. As a rule, investment funds shall not be considered taxpayers; only investment funds that prepay receivables and are not qualified as investment entities will be bound to collect IBS and CBS on their activities.

In this context, although LC No 214/2025 has implemented some changes to the investment fund tax scenario, funds such as ETFs, FIPs and FIFs were not considered by the legislation as IBS and CBS taxpayers (and, thus, shall not collect these taxes on their activities). In line with the income tax rules, no taxation is due at the fund level.

From the quotaholders’ standpoint, investors whose economic activity comprises investment in funds shall collect IBS and CBS on the funds’ results that they receive. Conversely, non-professional investors shall not be subject to the collection of IBS and CBS on the funds’ results received by them.

As a general rule, IBS and CBS will begin to be charged by tax authorities at a 1% combined rate in 2026, in addition to the currently applicable indirect taxes (taxpayers that comply with certain ancillary obligations may be exempted from this initial charge). The Consumption Tax Reform is being gradually implemented until 2033.

Regulatory

CVM Resolution 175 mainly came into force on 2 October 2023 and significantly changed the regulatory framework applicable to investment funds in Brazil.

Tax

Law 14,754 substantially modified the overall tax treatment applicable to investment funds in Brazil. The main changes provided for by such legislation are as follows.

• As of 1 January 2024, earnings derived by investment funds, including closed-end funds, are subject to the come-cotas taxation.
• Earnings and gains of certain funds, such as FIPs, FIDCs, Stock Funds (FIAs) and ETFs, are not subject to such regime if they qualify as an investment entity on the terms defined by the National Monetary Council, and comply with the following requirements:
1. FIPs shall comply with the portfolio composition requirements established by CVM;
2. FIDCs shall have a portfolio composed of at least 67% credit rights and comply with the portfolio composition requirement within 180 days from the first subscription of quotas;
3. FIAs shall have a portfolio composed of at least 67% variable income financial assets (shares, subscription certificates, share deposit certificates, BDRs, etc), regardless of whether or not they are qualified as investment entities; and
4. ETFs shall comply with the portfolio composition, classification and reclassification requirements established by CVM, and shall have quotas listed on a stock exchange or organised over-the-counter market (an exception is made for fixed income ETFs).

If the funds do not comply with such requirements, they will be subject to the come-cotas taxation.

Funds of funds

Funds that invest 95% of their net assets in FIPs, ETFs (variable income), FIDCs (classified as investment entities), FIAs, FIIs, FIAGROs, FIP-IE, FIP-PD&I and Infrastructure Investment Funds are not subject to the come-cotas taxation.

Foreign quotaholders of Brazilian investment funds are not subject to the come-cotas taxation if they are not domiciled in a low-tax jurisdiction.

Different quota classes

If the investment fund has different quota classes, with different rights and obligations, and segregated net equity of the fund for each class, each quota class will be considered a fund for tax purposes.

The transference of quotas among different subclasses within the same class of quotas is not considered a taxation event for WHT purposes if there is no change in quota ownership and no distribution is to quotaholders.

Funds reorganisations

Law 14,754 introduced the tax treatment that should be observed in mergers, spin-offs and transformations of investment funds.

IOF

In June 2025, several changes to the IOF legislation were implemented by the federal government. Although the lawfulness of these changes was questioned by Brazilian taxpayers, the Supreme Court understood them to be compliant with the Federal Constitution and, hence, they were maintained in the legislation and are currently applicable.

Within these changes, the primary acquisition of FIDC quotas was included within the scope of IOF/Títulos and is now taxed at a 0.38% rate.