Legal Guide for Foreign Investors in Brazil - Apex-Brasil

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Legal Guide for Foreign Investors in Brazil 3. Foreign Capital 3.1. General Features Foreign capital in Brazil is governed by Law 4.131 (the Foreign Capital Law) of 3 September, 1962, and Law 4.390 of 29 August, 1964. Both these laws were put into effect by Decree 55.762 of 17 February, 1965 and subsequent amendments. According to the Foreign Capital Law, “foreign capital is considered to be any goods, machinery or equipment that enters Brazil with no initial foreign exchange disbursement, intended for production of goods and services, and any funds brought into the country for use in economic activities, provided that they belong to individuals or corporate entities domiciled or incorporated abroad”. The two official exchange markets in Brazil, both of which are subject to Central Bank regulations, are: the “commercial/financial” exchange market, essentially reserved for trade-related transactions and foreign currency investments in Brazil; and the “tourism” exchange market, used for such other transactions as unilateral funding transfers. Under Central Bank Resolution 3.265, of 8 March, 2005, free and floating exchange regulations were unified for financial institutions. Exchange operations entail exchange contracts for the inflow or outflow of foreign currency. 3.2. Registration of Foreign Capital Foreign capital must be registered by means of an Electronic Statement of Registration – Foreign Direct Investment Module (RDE-IED), on the Central Bank Information System (SISBACEN). For the purposes of the Electronic Statement of Registration, foreign direct investment is defined as permanent holdings in Brazilian companies or, in accordance with common market practices, long-term ownership by non-resident investors; individuals or corporate entities residing, domiciled or incorporated abroad, through ownership of shares or stock in Brazilian companies, or investments in foreign companies authorized to operate in Brazil. According to rules currently in effect, the party responsible for the foreign direct investment must register with SISBACEN, prior to registering on the RDE-IED 23
Legal Guide for Foreign Investors in Brazil Module. He is then issued a permanent number, and all subsequent changes and additions must be recorded under this same registration. According to provisions of Circular 2.997/00, foreign investments to be effected and registered are not subject to preliminary review or verification by the Central Bank. The declaratory nature of the statement implies that the Brazilian company receiving the investment, and/or the representative of the foreign investor, are responsible for effecting registration. All foreign investment must be registered with the Central Bank. Such registration is required for remittances abroad, repatriation of capital, and for registration of reinvestment of profit. 3.3. Currency Investments No preliminary official authorization is required for investment in currency. To subscribe capital or purchase stock in an existing Brazilian company, the investor need only transfer the funds by means of a banking institution authorized to operate with foreign exchange. However, authorization of the exchange contract is conditional upon presentation of a RDE-IED registration number for the foreign investor and for the Brazilian company receiving the investment. Registration of the investment must be effected through the RDE-IED System by the Brazilian company receiving the investment and/or the representative of the foreign investor, within 30 days of closing the exchange contract. In the event that the registration of the foreign investment is to be paid from a non-resident account in Brazil, it may be effected in Brazilian currency. All transactions relating to such investments must be effected through the nonresident account, with updating of the corresponding investment registration by means of the RDE-IED Module. 3.4. Investment via Conversion of Foreign Credits Investments related to foreign resources not registered with the RDE-IED System are subject to prior authorization from the Central Bank’s Department for Combating Financial Crimes and Supervision of Exchange and International Capital (DECIC). Conversion into investment of foreign credits duly registered on the RDE-IED Module does not require prior authorization from the Central Bank. 24
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Legal Guide for Foreign Investors in Brazil - Apex-Brasil

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