A group formed by entities, accelerators and investment funds, of which ABES is a part, released a position with suggestions for improvements to the proposed Law Project (PL) of the Legal Framework for Startups, sent by the Executive Branch to the National Congress on 10/19/2020. The signatories of the document understand that the PL brings important advances to the innovation and entrepreneurship ecosystem, but that they identified the lack of points that they understand “essential for this legislation to have a real impact on accelerating the growth of the startup universe in Brazil”. See the full statement below. Download the document here: Positioning on the PL Proposal of the Legal Framework for Startups.
Position on the PL Proposal of the Legal Framework for Startups sent to Congress on 10/19/2020
O Legal Framework for Startups, sent by the government to Congress, is of enormous importance for the development of the Brazilian startup ecosystem. These innovative companies feature business models, investment structures and working relationships that are specific and necessary for business growth.
Within the proposal, we perceive significant advances, but we cannot fail to mention the lack of points that we believe are essential for this legislation to have a real impact on accelerating the growth of the universe of startups in Brazil, among them, we highlight:
1. Equivalence of tax treatment on investment in startups and stimulus policies.
2. Regulation of stock options so that they are not taxed upon granting them, only on possible capital gains.
3. Possibility of framing simplified S/As in Simples Nacional.
Investing in early-stage startups requires legal certainty for the investor and fiscal stimulus to accelerate their growth. The application of policies that bring these two points together has been a recipe for success in the most innovative countries in the world. The Legal Framework expands legal certainty, including various investment instruments and ensuring that the investor is not characterized as a partner. However, it does not deal with tax equality and fiscal stimulus policies.
We currently have a negative situation in relation to this, because while investment in startups is taxed with fixed income, which can reach up to 22.5% of income tax, other investments, such as in companies listed on the stock exchange with a value of up to 500 million, LCIs/LCAs, real estate funds and incentivized debentures are EXEMPT, which makes the investor prefer them, as they have much lower risk and liquidity compared to investing in startups.
In our understanding, without these points, the effective impact of the Framework will be less than what is necessary for Brazil to accelerate its innovation. Innovating is not an option for countries, but a necessity. And, although we have had a great development of the investment and startup ecosystem in recent years, we are still far behind when comparing Brazil with other countries and with the potential we have.
The OECD highlights the importance of fiscal stimulus policies for investment in startups and all BRICS, except Brazil, have already adopted policies in this regard. Brazil needs to encourage private investment in innovative businesses as a way of generating wealth.
The organizations below subscribe to this letter (in alphabetical order)
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