On January 30, 2017, National Monetary Council Resolution 4,533 of November 24, 2016 (“CMN Resolution 4,533”) took effect, altering some of the provisions of CMN Resolution 3,844 of March 23, 2010, covering the treatment of foreign capital in Brazil. The main alterations established by CMN Resolution 4,533 are:
1) The company receiving the foreign direct investment (“Receiving Company”) is solely responsible for the veracity, legality and economic grounds of the information declared in the Electronic Declaratory Register, Foreign Direct Investment module (“RDE-IED”), so that the representative of the foreign investor is no longer responsible for those declarations, although having the possibility of consulting them.
2) The Receiving Company can appoint attorneys-in-fact in the RDE-IED (individuals or legal entities), with authorization to alter its records. The financial institutions and other institutions authorized to function by the Brazilian Central Bank (“BCB”) can include and alter attorneys-in-fact, as long as they are authorized by the Receiving Company. The attorneys-in-fact must keep the documentation on this authorization for at least five years from the ending date of that authorization.
3) The transactions to capitalize profits, dividends, interest on equity and earnings reserves must be registered as reinvestments in the currency of the country to which they could be remitted, measured according to the value declared in reais, or in the case of investments recorded in Brazilian currency originally, in reais.
The BCB has also made the new RDE-IED system available as the environment for registering foreign direct investment, to replace the old system called Sisbacen (the manual can be accessed at the link:https://www.bcb.gov.br/ftp/infecon/RDE/ManualRDE-IED.pdf), simplifying the registration process.
The amounts from: (a) inflow of cash; (b) conversion of debt into foreign direct investment; (c) transfers between investment modalities; (d) conveyance from abroad of foreign equity interests into capital of Brazilian companies; and (e) remittances abroad of profits, dividends, interest on equity and repatriation of capital, as specified in Art. 33-A of BCB Circular 3,689 of December 16, 2013 (“Circular 3,689/13”), now can be registered automatically in the RDE-IED module, based on the information contained in the record of the foreign exchange transaction or international transfer in reais.
The other registrations of foreign capital, financial transactions (ROF) and portfolio investments continue to be carried out in the Sisbacen.
Besides the entry into force of CMN Resolution 4,533, January 30, 2017 also marked the start of effectiveness of the alterations promoted by Circular 3,814 of December 7, 2016 and by Circular 3,822 of January 20, 2017, in both cases to Circular 3,689/13, regulating under the scope of the BCB the provisions on foreign capital in the country and Brazilian capital abroad.
According to Art. 34-A of Circular 3,689/13, the value of net equity and capital stock paid into the Receiving Company, as well as of the capital paid up by each foreign investor, must be kept updated in the RDE-IED, in the following time frames:
(a) within 30 days counted from the date of an event that alters the equity interest of the foreign investor; and
(b) annually, by March 31st, referring to the base date of December 31st the previous year, except for Receiving Companies with total assets or net equity worth R$ 250 million or more, which are covered by Art. 34-B of Circular 3,689/13.
Additionally, Art. 34-B of Circular 3,689/13 stipulates that the Receiving Companies with total assets or net equity worth R$ 250 million or more must file four “Economic-Financial Declarations” each year in the RDE-IED, with the following timing:
(a) the declaration referring to the base date of March 31st must be submitted by June 30th;
(b) that referring to the base date of June 30th must be submitted by September 30th ;
(c) that referring to the base date of September 30th must be submitted by December 31st; and
(d) that referring to the base date of December 31st must be submitted by March 31st of the following year.
Therefore, as of January 30, 2017, the Receiving Companies have been subject to the new rules summarized above regarding reporting information to the BCB.
New obligations to the Brazilian Federal Revenue Service (“RFB”) related to the National Registry of Legal Entities (“CNPJ”) of entities domiciled abroad:
We remind our clients that according to RFB Normative Instruction 1,634 of May 6, 2016, as of January 1, 2017, foreign companies with investments in Brazil (except for investments in the capital market) have been subject to the following obligations.
Within 90 days of enrollment on the CNPJ, the representative of the foreign investor in Brazil must present a digital dossier containing the following documents, to any office of the RFB:
(a) constitutive act of the foreign company or a certificate showing the all its records regarding incorporation in the country of origin, as specified in the “Table of Documents and Orientations” contained in Annex VIII of RFB Normative Instruction 1,634/16, which can be accessed at the link:http://normas.receita.fazenda.gov.br/sijut2consulta/anexoOutros.action?idArquivoBinario=42599);
(b) authenticated copy of the identity document or passport of the legal representative of the entity in the country of origin;
(c) a corporate act demonstrating the powers of management of the legal representative in the country of origin of the foreign entity (minutes of the corporate meeting of election or equivalent document), if that information is not stated in the constitutive act;
(d) authenticated copy of the power-of-attorney instrument granting powers to the legal representative in Brazil (if not included in the constitutive act), who must have domicile in Brazil, with powers to manage the assets and rights of the entity in the country and represent it with the RFB;
(e) authenticated copy of the identity document of the representative of the foreign entity; and
(f) “Chart of Partners and Administrators” (“QSA”) of the foreign entity, using the web information collection program (“Coleta Web”) of the RFB.
Furthermore, the representative in Brazil of the foreign investor must report to the RFB the entire chain or ownership until natural persons, defined as the final beneficiaries, or any of the entities mentioned in Art. 8, § 3o[1], of RFB Normative Instruction 1,634/16.
In the case of the entities mentioned in Art. 8, § 3, or RFB NI 1,634/16, the listing information must cover the individuals authorized to represent them, their officers or other executives, if any, as well as the as the individuals or legal entities in whose favor these entities were constituted.
For purposes of RFB NI 1,634/16, the final beneficiary is considered to be:
(i) the individual (natural person) who, in the final instance, directly or indirectly, has power of control or significant influence over the foreign entity; or
(ii) the person (natural or legal) in whose name a transaction is carried out.
Significant influence is presumed when the individual: (a) owns more than 25% of the entity’s capital stock, directly or indirectly; or (b) detains power over or exercises preponderance in the corporate decisions and the power to elect the majority of the executives of the entity, even if not controlling it.
Entities domiciled abroad already enrolled on the CNPJ before January 1, 2017 must report the final beneficiaries in the QSA, by means of the online “Coleta Web” application, and send the documents listed above to the RFB when making any change in the entity’s enrollment information, or by December 31, 2018.
Any foreign entity that fails to report the information on the final beneficiaries within the time limit given above will be prevented from carrying out financial transactions in Brazil, including movement of balances in bank accounts, reservation made for transactions necessary for return of the investment to the country of origin and for compliance with obligations assumed before the suspension.
The requirement to identify the final beneficiaries of foreign entities, now adopted by the RFB, is in line with the global trend, for the purpose of preventing and combating corruption and money laundering.