Real Estate Investment Funds (FIIs) are a popular form of investment in Brazil, offering the opportunity to participate in the real estate market without the need to directly acquire properties. However, like other forms of investment, FIIs are subject to specific taxation rules that investors need to be aware of to avoid unpleasant surprises regarding the taxation of these assets.
1. Income Tax Exemption for Individuals One of the advantages of FIIs is the exemption from Income Tax (IR) on the monthly distributions, provided that the investor is an individual and meets certain requirements:
- The fund must have at least 50 shareholders.
- The FII units must be traded exclusively on stock exchanges or organized over-the-counter markets.
- The investor benefiting from the exemption cannot hold units representing 10% or more of the total units of the fund or be entitled to receive 10% or more of the income generated by the FII.
2. Capital Gains Tax When selling FII units, the capital gain obtained is taxed at a rate of 20%, regardless of the sale value. This tax must be paid by the last business day of the month following the sale of the units, using the Federal Revenue Collection Document (DARF).
3. Come-Cotas Unlike other types of investment funds, such as fixed income and multimarket funds, FIIs are not subject to the “come-cotas,” a mechanism for the semiannual advance payment of tax on income.
4. Income Tax Return Declaration Investors must declare both the income received from FIIs and any capital gains in their Annual Income Tax Return. Information on exempt income and taxable capital gains must be carefully recorded to avoid errors in the declaration.
5. Loss Compensation Losses from the sale of FII units can be offset against future gains from the sale of units of other FIIs, provided that both are traded on the stock exchange or organized over-the-counter market. This compensation is limited to capital gains and does not extend to income distributions.
Conclusion
The taxation of Real Estate Investment Funds in Brazil presents features that can be quite attractive, especially the tax exemption on income for individual investors. However, it is essential to stay informed about the tax obligations related to capital gains and how to correctly declare these investments.