FIAGRO – the new Agribusiness Investment Fund was regulated by the Brazilian Securities and Exchange Comission (CVM) on an experimental basis.
Named officially “Investment Fund in Agri-industrial Productive Chains”, FIAGRO will have the potential to become one of the main investment vehicles for Brazilian and foreign investors, lender, insurance companies, fintechs and groups/family companies for funding, equity investment and tax planning in the agribusiness.
Through Resolution 39, CVM authorized the constitution and operation, as of August 1, of the following 3 categories of FIAGRO: (i) receivables fund (“FIAGRO-Receivables”), (ii) real estate fund (“FIAGRO-Real Estate”) and (iii) equity fund (“FIAGRO-Participations”).
See below the main points about FIAGRO after CVM regulation:
1. What is a FIAGRO: it is an investment fund regulated by the CVM dedicated to finance and invest in agribusiness.
2. What are the 3 categories of FIAGROs and their target assets: CVM has experimentally authorized 3 categories of FIAGROs:
(i) “FIAGRO-Receivables” take the form of “FIDC” and may invest in agribusiness receivables and securities backed by agribusiness receivables, including CRAs and LCAs;
(ii) “FIAGRO-Real Estate” takes the form of “FII” and may invest in rural lands and real estate receivables related to rural land, including CRIs;
(iii) “FIAGRO-Participations” take the form of “FIP” and may invest in equity interests in companies that explore activities in the agri-industrial chain, including convertible securities.
3. Who can benefit from FIAGROs: FIAGROs can be used by Brazilians and foreigners, including (i) lenders and fintechs, as a vehicle for credit and advance of receivables, (ii) real estate investors, as an investment vehicle for acquisition of rural lands in Brazil aiming at exploration, rural partnerships, land value appreciation, etc. (observing the legal restrictions for foreigners), (iii) Venture Capital, Private Equity and investors in general, as a vehicle for equity investment in agribusiness companies, and (iv) agribusiness family groups/companies, for asset and fiscal planning.
4. Favorable Taxation of FIAGROs: in the same way as real estate funds, income distributed by FIAGROs to individual shareholders will be exempt from income tax, provided that (i) the fund has more than 50 shareholders and (ii) the respective shareholder does not holds more than 10% of the fund’s equity or earnings.
As for investments, investments made by FIAGROs in CDA/WAs, CDCAs, LCAs, CRAs and CPRs are not subject to withholding income tax.
5. Favorable Taxation in FIAGROs’ Capital Contribution: FIAGROs shares may be paid-in in cash, assets and rights, including real estate (rural land, among others). The payment of income tax arising from the capital gain on the shares paid-in with rural property by an individual or legal entity may be deferred to the date defined for the moment of sale of these shares or redemption.
The CVM’s regulation of FIAGRO demonstrates the importance of this category of funds for the market. FIAGROs will allow Brazilian and foreign investors, lenders, fintechs, insurance companies and family groups to invest and finance the sector with legal certainty and tax efficiency.