Company: PAX
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001628280-25-025640
Chunk: 92

Company: Patria Investments Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 3
Chunk 92
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 reform, set to begin in 2026 and take full effect by 2033, replaces five existing taxes with two value-added taxes: the Tax on Goods and Services (IBS), managed by states and municipalities, which merges ICMS and ISS, and the Contribution on Goods and Services (CBS), managed federally, replacing PIS, COFINS, and IPI. A Selective Tax (IS) will also apply to goods and services considered harmful to the environment or public health.

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  Table of Contents  

In January 2025, Congress passed Supplementary Law No. 214 to regulate IBS, CBS, and IS. Financial services, including asset management, will begin to be taxed under this system in 2026. Since the IBS tax rate and calculation method remain undefined, we are evaluating the potential impact. Any increase in ISS-equivalent rates could raise tax costs and affect profitability.

Brazil is also considering income tax reform. Law No. 14,754, enacted in December 2023, introduced new taxation rules for local investment funds and offshore investments. Additional changes may follow, including Bill No. 1,087, proposed on March 18, 2025, which seeks to impose a 10% withholding tax on dividends paid by Brazilian companies to foreign shareholders starting in 2026. While foreign investors may recover part or all of this tax, the specifics remain unclear. The bill is under review and could be amended, with further tax reform measures possible.

The Brazilian government frequently enacts tax reforms that affect businesses and investors. These could result in higher tax burdens for us and our funds and portfolio companies, with potential consequences for financial markets and borrowing costs. Changes in how tax authorities interpret taxable events, rates, and calculations could significantly impact funds, investors, and financial performance. While most tax increases follow a calendar-year rule or a 90-day transition period, unexpected changes may still occur, posing compliance and financial risks.

Elsewhere, our subsidiaries in Colombia, Chile, Uruguay, the United Kingdom, Hong Kong, Mexico and the United States are subject to their respective tax laws, including income taxes, indirect taxes, and withholding taxes on dividends and cross-border transactions, which may affect their financial performance. Some of these subsidiaries benefit from special tax regimes or incentives, the interpretation and application of which may vary between us and the tax authorities. For instance, we rely on the Uruguayan Free Trade Zone (FTZ) regime, which grants exemption from national taxes on qualifying