What is LCI and LCA?

What are tax‑exempt bank notes?

Tax‑exempt bank notes (LCI) and tax‑exempt bank notes (LCA) are fixed‑income investments issued by banks. The big advantage: they are exempt from Income Tax for individuals.

Difference between tax‑exempt bank notes

The only difference is the destination of the money:

• Tax‑exempt bank note (LCI): the bank uses it to finance the real estate sector
• Tax‑exempt bank note (LCA): the bank uses it to finance the agribusiness

For the investor, they work in the same way.

Advantages

• Exemption from Income Tax (higher net income)
• Protection by FGC up to $50,000
• Yield generally linked to interbank rate (85‑100%)
• Security similar to certificates of deposit (CDs)

Disadvantages

• Minimum lock‑up period of 90 days (cannot withdraw before)
• Minimum investment usually higher ($200‑$1,000)
• Fewer options available than certificates of deposit (CDs)

Tax‑exempt bank notes vs. certificates of deposit (CDs)

A tax‑exempt bank note that pays 85% of the interbank rate can yield more than a certificate of deposit offering 100% of the interbank rate, due to the exemption from Income Tax:

In this example, they yield the same. But a tax‑exempt bank note of 90% of the interbank rate already beats the certificate of deposit of 100%.

When to invest in tax‑exempt bank notes

• When you won’t need the money for at least 90 days
• To diversify fixed‑income investments
• When you find rates above 90% of the interbank rate