Planned tax on real estate, agribusiness credit bills faces pushback

In his latest draft, Mr. Zarattini had proposed a 7.5% tax rate for these instruments, above the 5% originally proposed in the government’s provisional presidential decree (MP) in June. “We see that the most sensitive issue, the one involving the largest number of lawmakers, is precisely the one that affects agribusiness. So, the 7.5% tax on the LCA and LCI is a critical matter. We’re working to ensure we have majority support to pass the provisional decree,” he said.

“We’re considering going back to 5%, maybe even other rates, we’re not closing the door on the discussion. Reinstating this [ the exemption] is a possibility,” he added.

The proposed end to the tax exemption has drawn criticism from both the agribusiness sector and organizations involved in real estate financing.

Agribusiness representatives argue that taxing these securities could discourage new issuances and curb private-sector financing at a time when the industry is already facing other challenges, such as cuts to the government’s annual agricultural credit plan. Last week, Congressman Pedro Lupion, president of the Agribusiness Parliamentary Front (FPA), said the new tax “condemns” these instruments and that “there’s no room for compromise.”

Meanwhile, the Brazilian Association of Real Estate Credit and Savings Entities (ABECIP) has warned repeatedly that ending the exemption could raise funding costs and lead to a drop in new issuances. “Ultimately, this would make it harder for thousands of Brazilian families to buy a home, slowing real estate activity, a key generator of jobs across the country,” the group said in a statement in September.

The government’s economic team has defended the tax, saying it could help level the playing field between bank-issued securities and government bonds, which could become more appealing. Finance Minister Fernando Haddad said last week that these instruments would remain attractive because they would still be taxed at lower rates than other investments. He noted that studies by the Finance Ministry show much of the benefit from tax exemptions gets absorbed along the way and doesn’t reach the final borrower.

Mr. Zarattini’s report also upholds the government’s proposal to apply a flat 17.5% income tax on returns from financial investments in Brazil starting in 2026. This would replace the current system of tiered rates—22.5% for investments held up to six months and 15% for those held for more than two years.

“We’re keeping the 17.5% because the flat rate is good for the market. In fact, the market itself asked for the removal of brackets and the adoption of a single rate. With 17.5%, investors can offset gains and losses across investments, which benefits thousands of people, especially small investors, who will pay less tax and have more room to invest,” Mr. Zarattini said.

Controversy over limits to brokerage trades

Another controversial provision in the bill is language that could restrict brokerages from selling large blocks of shares through internal matching, the so-called order internalization. The sector, represented by ANCORD (National Association of Brokerage Firms), has called for the removal of a clause that defines the over-the-counter (OTC) market as exclusively “organized and multilateral systems.”

ANCORD argues that if this language remains, only one infrastructure—Brazil’s stock exchange B3—would effectively be allowed to handle large-block transactions. Internalization refers to trades executed between clients of the same brokerage, outside the exchange environment but still within a regulated institution.

According to the brokers, the language contradicts Brazil’s Securities and Exchange Commission (CVM) Resolution 135, which allows for large-block trades in the OTC market as part of a “centralized and bilateral trading system.”

ANCORD’s general director, José David Martins Júnior, said the text only needs to be “harmonized with CVM Resolution 135.” One solution, he suggested, would be to remove the paragraph requiring a multilateral organized OTC system to avoid legal conflict.

Mr. Zarattini said he was unaware of the brokers’ concern. He noted that he had spoken with all sectors impacted by the bill but had not been approached by ANCORD. “I don’t recall that issue. Honestly, no one has brought it up with me,” he said.