The importance of priority projects in the Brazilian capital market has grown exponentially in recent years, as indicated by the data regarding the issuance of incentivized debentures.

According to the December 2022 Incentive Debentures Report (109th edition) published by the Brazilian Ministry of Finance, the volume of incentivized debentures (i.e., debentures entitled to the tax benefits of  Law 12,431/11) was approximately R$ 42.8 billion in 2022. During the same year, 249 authorizing ordinances were published by the Brazilian Government Ministries approving projects as priorities,[1] a higher number than the authorizing ordinances of 2021 (236) and 2020 (179).

According to the Report, the incentivized debentures correspond to 28.9% of the total volume of debentures traded between the beginning of 2021 and the end of 2022. This demonstrates how crucial it is to raise funds through incentivized debentures in the Brazilian capital market.

Data from the March 2023 Capital Market Report published by the Brazilian Association of Financial and Capital Markets Entities (Anbima) shows that the total volume of debentures from the beginning of January to the end of March reached R$ 36.6 billion, through 74 issuances. Of this amount, about R$ 4.4 billion refers to the incentivized debentures, through nine issuances.

In this regard, the Decree 11,498/23 on incentive to priority projects –1 of the 13 measures of the federal government to boost the Brazilian economy – brings important changes to the infrastructure field and the capital market.

The new decree is relevant both for sectors that traditionally have projects considered priorities (such as logistics and transport, urban mobility, energy, telecommunications, broadcasting, basic sanitation and irrigation) and for new categories that it defines.

Decree 11,498/23 amends the Decree 8,874/16, which had regulated Law 12,431/11, and establishes the following measures:

  • expands the list of sectors that may have investment projects considered priority projects and, consequently, eligible for the tax benefits of Law 12,431/11;
  • establishes a new mechanism of maximum annual volume for the issuance of securities for priority projects, to be determined annually by the Ministry of Finance; and
  • Determines that ministerial ordinances approving priority projects must inform the maximum amount that can be raised through the issuance of securities with tax benefits for the approved priority project.

Expansion of the list of sectors

Decree 11,498/23 increases the number of sectors that may have projects considered priority projects. The new sectors are:

  • education;
  • health;
  • public safety and the prison system;
  • urban parks and conservation areas;
  • cultural and sports facilities; and
  • social housing and urban requalification.

According to the Decree 11,498/23, projects developed in these sectors may be considered priority projects because they provide relevant environmental or social benefits.

In addition to this possibility, by the new decree, if projects of these new sectors and traditional sectors are carried out in subnormal agglomerations or isolated urban areas – as defined by the IBGE – they can also be considered projects that provide relevant environmental or social benefits.

In these two scenarios, the need for an ordinance of the competent ministry to approve the project as a priority and make it eligible for the tax incentives of Law 12,431/11 remains in force.

The expansion of the list of projects that provide environmental or social benefits is a fundamental step to give more clarity to this concept and increase the number of projects considered priority projects.

It is, therefore, a positive measure for the project submission process. When promoting environmental or social benefits already recognized by the Brazilian legal system, projects in the sectors mentioned above and/or projects located in subnormal agglomerations or isolated urban areas should be classified as priorities by the competent ministry.

In the case of projects in the new sectors, the amount that may be raised by the issuance of securities with tax incentives is limited to the capital expenditure calculated for the project, with the exception of financial expenses. Also in relation to projects in the new sectors, the benefits of Law 12,431/11 will apply to papers issued from the beginning of 2024.

Maximum annual volume raised by securities issues with tax benefits

Law 12,431/11 defines that priority projects will be granted tax incentives in the case of issuance of incentivized debentures or incentivized certificates. The incentives are:

  • reduction to 0% of the Personal Income Tax rate; and
  • reduction to 15% of the Corporate Income Tax rate.

There was no form of direct control over the total volume that could be captured through the issuance of securities with these tax incentives. Decree 11,498/23 establishes that the Ministry of Finance may define, by ministerial ordinance, the maximum annual volume that may be raised by issuing securities with tax incentives. The volume can even be broken down by sector.

Although there is still no ordinance published in this sense, by Decree 11,498/23, when the maximum annual volume of issuances is reached, securities with tax incentives in general or for certain sector(s) may no longer be issued until:

  • the ordinance in question ceases to have effect – which would occur annually; or
  • New ordinance expands the maximum annual volume of emissions for the year in question.

As Decree 11,498/23 is already in force, an ordinance of the Ministry of Finance stipulating the maximum annual volume of emissions with tax may be published still in 2023.

Maximum amount raised by the issuance of securities

As already explained, for a project to enjoy the tax benefits of Law 12,431/11, it is necessary that it be recognized and approved as a priority project through a ministerial ordinance. This must be done by the competent ministry in relation to a specific sector, after the company proposes the project to the ministry.

In addition to the requirements already mentioned, Decree 11,498/23 defines that the maximum amount to be raised by the issuance of securities with tax benefits must be defined in the ministerial ordinance that recognizes the project as a priority project.

This requirement is also already in force and should be followed by the next ministerial ordinances that analyze the possibility of projects being considered a priority project or not.

As it turned out, the changes are relevant and impact both the traditional sectors related to priority projects, by establishing new requirements, and the new sectors, which previously did not benefit from the incentives of Law 12,431/11.

Despite the changes, article 1 of Law 12,431/11 did not suffer any impact. Thus, incentives for foreign investments in the Brazilian capital market proposed by the law can still be used, including in infrastructure projects not covered by Decree 8,874/16 – despite the important sectoral expansion promoted by Decree 11,498/23.


[1] The number of 249 authorizing ordinances encompasses all projects approved as priorities in 2022, including projects that issued and did not issue incentivized debentures.