Legal Guide for Foreign Investors in Brazil - Apex-Brasil

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Legal Guide for Foreign Investors in Brazil With regard to operations that require registration on the RDE-IED Module, article 8 of the Annex to Circular 2.997/00 regards as conversion into foreign direct investment all “transactions whereby credits eligible for transfer abroad, under current rules, are used by non-resident creditors to purchase or pay up holdings in a Brazilian company” In order to effect registration, however, the investor and company in which the investment is to be made must provide: (i) a statement from the creditor and committed investor, defining precisely the due dates of installments, the respective sums to be converted and, with respect to interest and other charges, the period to which they refer, and the respective rates and calculations; and (ii) a binding statement from the creditor, agreeing to the conversion. 3.5. Investment via Import of Goods without Exchange Cover Investment in the form of importation of goods without exchange cover (applicable only to tangible goods), effected as a means of acquiring paid-up stock, do not require prior approval from the Central Bank. For the purposes of registration on the RDE-IED Module, both tangible and intangible assets must be targeted exclusively at paying-up of capital. Registration of foreign direct investments, resulting from the import of intangible assets without coverage of an exchange contract, requires prior approval from DECIC. For tangible assets, the value recorded on the Register of Financial Transactions (ROF) Module of the RDE System, linked to the Import Declaration (DI); and the currency stated on the corresponding ROF may be used. Registration of foreign capital that enters Brazil in the form of assets must be made in the currency of the investor’s country or, at the express request of the investor, in another currency, maintaining the exchange parity. Foreign capital is considered to be any goods, machinery or equipment that enter Brazil with no initial disbursement of foreign currency, intended for production or marketing of goods or provision of services. The import of used goods is conditional upon the absence of similar goods in Brazil. Used goods must be used in projects that foster the country’s economic development. Once the tangible goods have been cleared by customs, the Brazilian company has 90 days to register the investment with the Central Bank. 25
Legal Guide for Foreign Investors in Brazil 3.6. Capital Market Investments On 26 January, 2000, the Brazilian Monetary Council approved Resolution 2.689, whereby any non-resident investors, whether and individual or corporate entities, individually or collectively, may invest in the Brazilian financial and capital markets. Investment Companies – Foreign Capital, Investment Funds – Foreign Capital, Annex IV Portfolios (mechanisms created by Annexes I, II and IV) and Fixedincome Funds – Foreign Capital, were replaced by a unified investment “portal”, through which foreign funds entering Brazil on behalf of non-resident investors may be invested in fixed- or variable-income instruments and investments, offered on the financial and capital markets, just as they are to resident investors. Non-resident investors will now use the same registration to invest in the fixed- and variable-income markets, and may migrate freely from one type of investment to another. To access these markets, the foreign investor must appoint a representative in Brazil, responsible for registering the transactions, filling out the form attached to Resolution 2689/00, and registration with the Brazilian Securities Commission (CVM). Pursuant to Article 6, insets I and II of Resolution 2.689/00, bonds and securities belonging to foreign investors must be kept in custody by entities authorized by CVM or by the Central Bank, or (if applicable) registered with the Special Settlement and Custody System (SELIC) or with the registration and financial settlement system supervised by the Center for Custody and Financial Settlement of Securities (CETIP). In all transactions carried out on behalf of a non-resident investor, the exchange contract must state the RDE registration number in the appropriate field. 3.7. Remittance of Profits Generally speaking, there are no restrictions on the distribution of profits and their remittance abroad. Since January, 1996, Profits have been exempt from withheld income tax. Profit remittances must be registered as such through the RDE-IED Module, considering the stake held by the investor in the total shares or stock as a proportion of paid-up corporate capital in the company. Brazil has signed double-taxation treaties with the following countries: Sweden, 26
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Legal Guide for Foreign Investors in Brazil - Apex-Brasil

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