New requirements for investment in Brazil

The Brazilian Government has issued Decree No. 4.166/02, IN 200/02 and IN 167/02, which require registration with the Federal Taxpayer Registry of legal entities and individuals who reside abroad and have some kinds of investments in Brazil.

Therefore, any legal entity or individual residing in the Argentine Republic or any other country, who holds investments in Brazil, may be obliged to comply with this new requirement. The basic aspects of this new rule are as follows:

1.    Who is obligated to proceed with this registration?

According to Brazilian rule, the new registration is required for those whose domicile is in a foreign country and have assets and rights in Brazil which are subject to ownership registration before public agencies such as: (i) real estate; (ii) vehicles; (iii) craft; (iv) aircraft; (v) corporate interests; (vi) bank accounts; (vii) applications in the financial and capital markets.

2.    What is the term of procedure for the new registration?

If the legal entity domiciled abroad owns real estate, vehicles, craft or aircraft in Brazil, registration with the CNPJ (legal entity registry) must be made until and including November 29, 2002. If it owns corporate interests, bank accounts or applications in the financial or capital markets until and including December 30, 2002.

If the individual lives abroad, registration with the CPF (individual registry) must be made as of December 1, 2002. Registration may be made in the Brazilian Embassy or Consulate of the individual’s country of residence, or in any Brazilian Federal Revenue Agency.

3.    Is there any exception for this new requirement?

The regulation rule regarding the registration of foreign legal entities expressly provides that this requirement is not applicable to rights regarding intellectual property (patents and trademarks).

4.    What is the procedure to register an entity or an individual?

The legal entities must: (i) contract an attorney-in-fact in Brazil with specific powers; (ii) submit the foreign corporate documents; and (iii) submit all requested forms and information requested by the Brazilian authorities.

The individuals may proceed with the registration in person or through an attorney-in-fact to one of the Brazilian authorities mentioned above (Brazilian Embassy or Consulate or Brazilian Federal Revenue Agency).

5.    What are the obligations that arise from this new registration?

First of all, it is important to clarify that this new rule does not obligate the investor to present any revenue declaration or information about turnover to the Brazilian authorities. The purpose of this registry is to create another way of controlling foreign investments and investors in Brazil. The main obligation that arises from the new rule is to keep the investor’s data updated for the Brazilian authorities.

6.    What are the penalties in case of breach of the new requirement?

In case of breach a fine may have to be paid and rights may be restricted. These restrictions may include being prevented from transferring Brazilian investments.