New Framework for Securitization is published

This August, Provisional Presidential Act No 1,103/2022 was voted into law, resulting in the publication of https://www.in.gov.br/en/web/dou/-/lei-n-14.430-de-3-de-agosto-de-2022-419972469 . Dubbed the "New Framework for Securitization", the statute implemented the Insurance Risk Note (“Letra de Risco de Seguro” - LRS), which allows (re)insurance companies to spread their financial risks across the capital market, assigning them to a special-purpose entity (“Sociedade de Propósito Específico” - SPE) by issuing a negotiable instrument valid as marketable security. The law aims to develop the insurance sector in Brazil, granting more stability to debt securitization.

Companies in the insurance sector should keep the new rules in mind, as they not only introduced positive developments but also significantly changed tax procedures. Now, companies whose corporate purpose is the securitization of credits may deduct fundraising expenses from the calculation basis of the contributions to the PIS/Pasep and Cofins, which stand for the Employee’s Profit Participation Program and the Social Security Financing, respectively.

In the past, said prerogative was restricted to companies focused on the securitization of credits related to real estate, financial and agricultural industries. Furthermore, all credit securitization companies shall now be taxed on their taxable income – not only the ones that provide services to those three sectors.