The growing use of structured transactions involving tax-incentivized debentures, as provided in Articles 1 and 2 of Law No. 12,431/2011, has established a strategic path not only to optimize tax outcomes for Brazilian issuers, but also to attract foreign capital while reducing legal and operational risks.

From the perspective of international investors, this structure offers an efficient alternative for accessing investment projects in Brazil through debt instruments (rather than equity), in line with global trends favoring regulatory certainty and stable returns in emerging markets.

These tax-incentivized debentures allow non-resident investors to receive income exempt from withholding income tax (IRRF), provided that the proceeds are allocated to projects that meet the requirements of the law and the resolutions of the National Monetary Council (CMN).

In addition to the IRRF exemption, the issuance of such debentures offers tax benefits to the Brazilian issuer, including a reduction in the taxable base for Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL).

In times of uncertainty—or when there is a need to reduce governance risks and exposure to liabilities—debentures serve as a safer alternative to direct equity participation.

This allows foreign investors to access project cash flows from the outset without immediately taking on equity or control-related risks, while preserving flexibility for future conversion, buyback, or refinancing.

Glossary – Capital Markets

Law No. 12,431/2011 – Brazilian federal law that establishes tax incentives for certain debt instruments used to finance infrastructure and other strategic projects.

Articles 1 and 2 – Specific provisions within Law No. 12,431/2011 that regulate the issuance and conditions of eligible debentures.

Withholding income tax (IRRF) – Tax levied at source on income paid to non-resident investors.

National Monetary Council (CMN) – Brazil’s top financial regulatory authority, responsible for issuing resolutions and overseeing monetary policy.

Corporate Income Tax (IRPJ) – Federal tax on corporate profits in Brazil.

Social Contribution on Net Profit (CSLL) – Additional tax levied on corporate profits to fund social programs.

Liabilities – Legal or financial obligations that a company may face.