Brazil’s Economy Minister removes real estate funds from tax reform to preserve the industry

RIO DE JANEIRO, BRAZIL – Economy Minister Paulo Guedes on Wednesday, July 14, confirmed that real estate funds (FIIs) will be removed from the bill to tax dividends under the tax reform. “We have removed real estate funds from the reform in order not to kill this industry,” he said.

The Minister said that the government has conceded to the private sector in the preparation of the reform, which led to the revision of what he admitted was a balancing mistake due to conservative calculations by the Federal Treasury in the rates foreseen in the first draft of the bill that deals with income tax.

“I was very pleased with the private sector’s reaction to the reform … I don’t think the Treasury secretary (José Tostes) knows more than entrepreneurs.”

Guedes further said that, as with FIIs, the transfer of dividends between subsidiaries will not be taxed, as defined after “internal settling of scores.”

After praising Chamber president Arthur Lira, who, according to Guedes, has been working “brilliantly” in the coordination of matters forwarded by the Executive, the Minister expressed his confidence that the draft will be passed this year, once the flaws in the reform are corrected.

He said the tax reform’s goal is to transfer to investor capital the tax burden that is currently levied on production. “We don’t want to tax the wheels of growth… I am greatly lowering taxes so that the money remains in the company,” he said, when referring to the corporate tax reduction.

According to Guedes, the reform principles are “unavoidable and undeniable,” replicating the international model but without the excess of countries like Chile, where dividends are taxed at 40%, twice as much as proposed in Brazil.

On the other hand, the Minister noted that companies would probably expedite the distribution of dividends, thereby generating a greater flow of dividends this year before the income tax reform comes into force.

For the full picture, see our Brazil Tax Reform: Complete Guide.