Managed portfolios and the new tax law

In recent years, the investment strategies used by business groups in Brazil have gone through major changes. Recent legislation sought to rebalance taxation on sophisticated structures, with a particular impact on vehicles such as exclusive funds and the practice of “carrying a position.”

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In this video (in Portuguese), Gabriel Timm, chief investment officer at Trio Gestora de Recursos, talks about the most attractive alternatives for making your company’s dividends earn more, and better.

The “carrying a position” strategy and tax efficiency

In the past, many investors held long-term assets inside investment funds, deferring income tax on their gains. That deferral created a tax efficiency benefit, since the tax was only paid on redemption.

Under the new legislation, the so-called come-cotas (the semiannual advance income tax on fund holdings) was extended to more structures, reducing the benefit of deferring tax. As a result, “carrying a position” inside certain funds lost part of its appeal as a tax strategy.

Do exclusive funds still make sense?

Exclusive funds have always been important tools for business families and large companies, both for portfolio customization and for tax efficiency.

However, the current law reduced the tax advantage of these funds, since they are now subject to tax regimes closer to those of traditional funds. Even so, it still makes sense for many groups to keep these vehicles, especially when the main goal is wealth management, succession and governance, not just the tax advantage.

Tax incentives: what remains and what’s gone

Still valid:

• Pension structures (PGBL and VGBL, Brazil’s private pension plans), which still offer deferral and succession benefits.
• Sector and regional incentives, such as tax-incentivized infrastructure debentures.
• Succession planning through funds, which still offers convenience and asset protection.

Eliminated or limited:

• Broad deferral in exclusive funds.
• The advantage of accumulating gains without periodic income tax, since come-cotas now applies far more broadly.

Impact on financial innovation

The new legislation aims to increase tax revenue and reduce tax inequalities among investors. However, an excessive tax burden and the elimination of incentives may discourage more sophisticated structures that, in many cases, also fostered innovation in the Brazilian financial market.

The challenge is to balance the push for revenue with keeping an environment that encourages the development of new financial products and solutions.

Recommendations for companies that want to innovate without unnecessary risk

For business groups, the way forward is to professionalize financial management. Some recommendations:

• Carefully weigh the tax costs against the benefits of sophisticated structures.
• Prioritize investment vehicles that combine efficiency, legal certainty and alignment with the company’s strategic planning.
• Avoid purely artificial structures, which can lead to tax assessments.
• Invest in treasury technology and automation to improve operational efficiency, without relying solely on tax gains.

Conclusion: why an investment manager matters

In this changing landscape, having a specialized investment manager becomes essential. A manager ensures the company or family group not only complies with the law but also makes the most of opportunities for diversification, liquidity and risk-adjusted return.

More than ever, sound financial management is the key to turning regulatory challenges into opportunities for sustainable growth.