Brazil will ease rules that grant tax breaks to local and foreign investors who buy corporate bonds, said Finance Ministry Deputy Executive Secretary Dyogo Oliveira.
The new rules, which are likely to be introduced in about two months, will apply to bonds with at least four years’ duration or to those linked to infrastructure projects, Oliveira said in an interview in his Brasilia office. The rules extend tax benefits to buyers of bonds from companies that are selling the securities to pay previous debts, as long as the new issue is for long-term bonds or forms part of an investment plan involving infrastructure, Oliveira said in an interview in his Brasilia office.
The percentage of total holdings that investment funds must hold in infrastructure-linked bonds benefitting from tax discounts will also be reduced, Oliveira said.
The government is trying to fund investments worth 955 billion reais ($482 billion) in projects such as roads, ports and dams as part of its growth acceleration program through 2014.
“These improvements are part of the government’s effort to develop private sources of funding for long-term investments,” Oliveira said.
Last June, Brazil exempted investors from income tax on returns paid on long-term bonds and those linked to investments that had been previously approved by the government. In December, the government also exempted foreigners from a 6 percent tax they have to pay when buying Brazilian bonds for this type of investment.
Investors won’t lose the tax benefits if the company selling the bond breaks the rules governing the tax cuts, Oliveira said. The new rules will also extend the benefits to bonds that are sold to finance the purchase of government concessions.