Tax hike threatens investment in agriculture and could hinder growth in the sector

The tax package presented by Finance Minister Fernando Haddad casts a shadow over activities linked to the countryside in the taxation of agribusiness, especially in the financial investments that finance it. MP 1303 generates uncertainty and threatens the financing bases of the rural production chain.

Even in the face of a challenging internal and external scenario, the sector has demonstrated vigor so far: the GDP "in-house" grew 12.2% in the first quarter of 2025 compared to the previous period. Agribusiness exports grew 1.8% in the first four months of the year, compared to the same period in 2024, according to a survey by Cepea/Esalq-USP.

Among the most sensitive points of the new package is Provisional Measure 1,303, which changes the taxation of several types of investment — including those that historically financed the development of agribusiness. The proposal creates a standard rate of 17.5% of Income Tax on income, affecting stocks, crypto assets, funds, and even exempt instruments, such as LCAs (Agribusiness Credit Letters), CRAs (Agribusiness Receipt Certificates) and Fiagros (Agribusiness Chain Investment Funds).

Although the government claims that the MP aims to "correct distortions, build tax equality and maintain fiscal balance", analysts consulted by Gazeta do Povo point out that it could compromise the sustainability of one of the most dynamic segments of the Brazilian economy.

How is agriculture financed and why is the MP a concern?

Agribusiness has faced difficulties in accessing credit at competitive rates. Producers faced difficulties in accessing the Harvest Plan this year. With the high Selic rate, the cost of financing has increased significantly. In April, the average monthly interest rate for rural credit operations with earmarked resources was 1.15%, the highest since 2011. For financing of agribusinesses, this rate was 0.98%; and for producers, 0.97%.

In addition to traditional financing, the sector depends on specific financial instruments, such as Fiagros, LCAs and CRAs, which until now had tax exemptions. MP 1,303 directly affects these mechanisms, removing incentives and increasing the cost of credit.

The end of exemption: what changes for the main investments Fiagros: income will have IR from 5% to 17.5%

Before the MP : Investment Funds in Agroindustrial Production Chains (Fiagro) distributed income exempt from IR to individuals, as long as they had more than 100 shareholders and shares traded on the stock exchange. The sale of shares with profit was taxed at 20%.

With the MP (from 2026) : The exemption ends. Income will be taxed at 5% (if the previous conditions are maintained). Otherwise, the rate rises to 17.5%. Capital gains on the sale of shares will be taxed at 17.5%.

LCAs and CRAs: The End of an Investor Benefit

Before the MP : Agribusiness Credit Letters (LCA) and Agribusiness Receivables Certificates (CRA) were exempt from IR, attracting conservative investors.

With the MP : Applications made from January 1, 2026 will be taxed at 5%.

Fiagro-FIDC: What happens to one of the fastest growing funds?

Credit Rights Investment Funds backed by agribusiness have been growing rapidly — the net equity of Fiagro-FIDCs has jumped 204% since March 2023, reaching R$47.7 billion in 2025.

With the provisional measure, income will be taxed at 17.5% at the time of distribution or redemption. Funds that do not meet the requirements for the reduced rate tend to lose attractiveness.

What are the effects of the measures for agribusiness? More expensive credit and brakes on investment and growth

According to Marcelo Winter, legal consultant for the Brazilian Agribusiness Association (ABAG), the measure represents a “blow to the heart of the sector’s financing”. By removing tax benefits, the cost of raising funds increases, which will inevitably be passed on to producers.

“Taxing these instruments means making credit more expensive, reducing its attractiveness for investors and increasing the risk for producers,” says Winter.

With high interest rates and the new income tax, access to credit becomes even more limited. Rafael Bellas, from InvestSmart XP, points out that the impact will be immediate: “Less money available and at a higher cost for a sector that essentially depends on credit.”

The withdrawal of tax incentives discourages the flow of private capital to agribusiness. According to André Mattos, CEO of M6 Negócios, “by increasing the cost of money and reducing investor appetite, the government is blocking an important vector of growth and innovation in the field.”

Abag warns: if Congress does not review the MP, the impact will be long-lasting — slowing growth, compromising the competitiveness of Brazilian agriculture and driving away national and foreign investors.

Legal uncertainty drives away investors

In addition to the tax burden, the market is also concerned about the climate of legal uncertainty. Moacir Teixeira, partner at Ecoagro – a company specializing in solutions for the sector – says that the government’s decisions seem “disconnected, made in a hurry and without considering the systemic effect”. The feeling is one of instability – poison for long-term planning and for private investors.

Risk of inflation with rising production costs

The chain of events triggered by the provisional measure could culminate in inflation. Less credit and lower production mean higher prices for food and inputs in the future. “This could become a structural problem for the country,” warns Winter.

And for the investor? Less profitability

The changes represent a loss of confidence for investors, especially individuals. The standardization of income tax at 17.5% eliminates the incentive for long-term investment. Previously, the regressive table rewarded patience; now, investors pay the same tax, regardless of the investment term.

Guilherme Almeida, from Suno Research, warns: “This discourages pension portfolios and structural projects”. For Fábio Murad, financial educator, the current logic is “pay the tax now and don’t think about the future”.

Furthermore, net profitability falls, leading to asset repricing and investor outflows. According to Murad, international diversification is no longer a differentiator but a necessity. American stock exchanges offer predictability, liquidity and exchange rate protection — attractions that are increasingly scarce in Brazil.

Measures could undermine one of the country's main economic strengths

The set of changes proposed by Provisional Measure 1,303/2025, instead of strengthening fiscal balance, could undermine one of the country's main economic strengths. By compromising access to credit, increasing risk and reducing predictability, the government is jeopardizing not only the dynamism of agribusiness, but also its ability to sustain national economic growth.

For experts, the future of the sector will depend on Congress' sensitivity in mitigating the adverse effects of the proposal — at the risk of paralyzing investments, blocking the field and directly affecting Brazilians' tables.