Receivables; Credit | Demystifying Brazilian FIDCs: 7 Key Insights for Companies and Investors About the Fund for Receivables Acquisition and Credit

Receivables Investment Funds (Fundos de Investimento em Direitos Creditórios – FIDCs) are becoming the most attractive vehicle for investors and corporate groups in Brazil to anticipate receivables from suppliers and clients and to enable credit operations.

Currently, there are over 3,000 FIDCs registered with the Brazilian Securities Commission (CVM), collectively managing over BRL 700 billion in net assets.

Below are 7 key insights companies and investors should consider regarding FIDCs:

1. What Is a FIDC? A FIDC is a receivables investment fund governed by CVM Resolution No. 175 and its Regulatory Annex II.

2. How Do FIDCs Work? FIDCs operate through the engagement of essential service providers, including a fund administrator and asset manager, both duly registered with the CVM. These agents must comply with the fund’s bylaws regarding investment and management of investor funds, duties and responsibilities, compliance, reporting obligations, auditing, and other governance provisions.

3. What Types of Receivables Can FIDCs Acquire? The types of receivables eligible for acquisition by a FIDC, along with the supporting documentation, must be set forth in the fund’s bylaws. These may include credit rights arising from commercial papers, invoices, promissory notes, commercial contracts, tax invoices, and other credit instruments.

4. How Can FIDCs Engage in Credit Transactions? FIDCs are not permitted to extend credit directly, as this activity is restricted to financial institutions in Brazil. However, FIDCs may purchase or hold bank instruments (e.g., Bank Credit Notes – CCBs) and capital markets instruments (e.g., Commercial Notes) issued by borrowing companies in favor of financial institutions, which may subsequently sell the credit to the fund.

5. What Are the Tax Advantages of FIDCs? FIDCs enjoy favorable tax treatment. The acquisition of receivables within the fund is not subject to corporate income tax (IRPJ), social contribution on net profit (CSLL), or federal social contributions (PIS and Cofins), and a zero IOF rate applies.

Regarding the taxation of income, amortization, or redemption of fund shares, the applicable income tax (IR) is deferred and becomes due only upon distribution to investors, provided the FIDC qualifies as an “investment entity.”

6. Criteria for FIDCs to Qualify as Investment Entities: To be recognized as an investment entity—and thus eligible for tax deferral—the FIDC must meet specific requirements, including: (i) Portfolio Composition: At least 67% of the fund’s assets must consist of credit rights; (ii) Professional and Discretionary Management: The fund must be managed on a discretionary basis by professional agents or service providers (e.g., administrator and asset manager); (iii) Constitutive Documents: The fund’s bylaws and other governing documents must define the strategies to be employed by the manager to generate returns for investors.

7. Can FIDCs Acquire Receivables from Related Parties? Article 42 of Regulatory Annex II to CVM Resolution No. 175 prohibits FIDCs from acquiring credit rights originated or assigned by the fund’s administrator, asset manager, specialized consultancy, or their related parties.

However, according to CVM’s Circular Letter No. 6/2024/CVM/SSE of October 30, 2024, paragraph 1 of Article 42 lifts this restriction when: (i) the asset manager, credit rights registrar, and custodian are not related parties among themselves; and (ii) the registrar and custodian are not related to the originator or assignor of the receivables.

This exception does not apply if the FIDC’s shares are offered to the general public.

With the costs of setting up, administering, and managing FIDCs becoming increasingly competitive, this vehicle should be seriously considered by investors and corporate groups seeking efficiency in receivables anticipation and credit structuring.