A Fundo de Investimento em Participações or “FIP” is an efficient Brazilian investment vehicle in for PE funds. It is not a legal entity but a pool of resources, incorporated by investors as co-ownership, aiming at investing in shares, debentures, subscription bonuses and other securities convertible into shares issued by corporations ‘’S.A.’’.
The advantage of using the FIP structure for investments in Brazil is that:
(i) this investment vehicle is not subject to taxation in Brazil
(ii) its distributions to foreign investors are not subject to withholding income tax either, provided:
A. none of the investors are located or residing in tax haven jurisdictions
B. one single investor cannot alone, or in conjunction with its related parties, own more than 40% of the total quotas (akin to shares conceptually) issued by the FIP.
C. one single investor – solely or along with its related parties – cannot have the right to receive 40% or more of the total income and proceeds distributed by the FIP.