Investment Funds that have been dissolved and are in the process of being liquidated are considered communities.
Internal Revenue Service issued its opinion in Ruling Nº 1.513 of August 6, 2020, regarding a consultation on the tax treatment of income obtained by investment funds whose dissolution had been agreed and which are in the process of being liquidated.
The Ruling reminds us of a pronouncement already made by the SII in 2013 when through official Letter Nº 2.702 of the same year it stated that an investment fund, after its dissolution and pending its total liquidation, will cease to be affected and the assets that make up the fund will form a community subject to liquidation under Law Nº 18.815.
According to the above, the Ruling Nº 1.513 ratifies the community treatment that would be granted to an investment fund that has been dissolved and is in the process of liquidation. Considering that the communities are governed by the general tax regulations, the income obtained by the community (ex-investment fund) during its liquidation will be taxed with First Category Tax, Global Complementary Tax, or Additional Tax, as appropriate, depending on the respective contributors.
This situation reminds us how difficult it is in tax terms for all parties involved to carry out these liquidation processes, especially when public investment funds may have a high number of contributors who become co-owners. We believe that this situation should be legally considered and incorporated into Law Nº 20.712 on the Administration of Third Party Funds and Individual Portfolios, some special rule that would allow the rules contained in the legal text to be maintained until the liquidation process of an investment fund can be properly completed, especially one that would maintain the character of equity to which the funds are assigned during the liquidation process, in a similar manner to what happens with legal personality in the case of companies that are in liquidation.
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