The category of investment fund in Brazil – “FIAGRO” (the Agribusiness Investment Fund), is a vehicle for the agribusiness development, expanding the investment possibilities in the sector.
FIAGRO’s constitution and operation were authorized, since some of its categories were regulated by the Brazilian Securities and Exchange Commission (CVM). On an experimental basis, the following categories of FIAGRO were authorized: (i) “FIAGRO-Receivables” (investments in agribusiness receivables and securities backed by agribusiness receivables); (ii) “FIAGRO-Real Estate” (investments in rural lands and real estate receivables related to rural land); (iii) “FIAGRO-Participations” (investments in equity interests in companies that explore activities in the agro-industrial chain, including convertible securities).
The tax reform, at first, threatened to end FIAGRO’s benefits, but the text currently in progress maintained the advantages from a tax point of view, which are mainly the income tax exemption for income distributed to FIAGRO shareholders and the exemption internal investments.
Currently, the tax aspects of FIAGROs are similar to FIIs’, especially the tax exemption of income distributed to individual shareholders, with the same requirements set out, and the taxation on a 20% rate on capital gains in the events of redemption and sale of quotas. There are specific features though, especially tax benefits related to the operation and financial applications by the FIAGRO in certain assets related to agribusiness.
FIAGRO has the potential to impact the agro sector, depending on its adhesion to the capital market, which has already started to happen with the first FIAGRO having already been created. It is, therefore, for investors to analyze the legal and regulatory aspects, as well as the opportunity for their particular situation.