The free flow of funds between countries is something which most investors in the United States and Europe take for granted. However, distinct from other countries, where the local government does not exercise control over the flow of international capital, Brazil imposes rules on the remittance of funds to and from Brazil.
Brazilian Exchange Controls function to identify the nature of foreign investments and purpose of foreign capital remittances to Brazil, in order to enable the Government to formulate its internal and external tax and economical policies.
Whenever a foreigner intends to send investment funds to Brazil, the individual or the legal entity must ensure that Exchange Controls Laws and Regulations in force are complied with, including any measures that must be accomplished prior to remittance, such as enrollments with the Brazilian Central Bank and Brazilian Tax Authorities, to obtain Foreign Investor and Foreign Taxpayer registration numbers, respectively.
Financial Market Investments and Direct Investments are subject to different tax treatments, but both require the appointment of a local representative of the foreign investor, as well the registration of any operation on the Brazilian Central Bank System (SISBACEN), necessary to allow operations on the Brazilian Stock Exchange, the remittance to Brazil and eventual repatriation of registered capital, loans and the interest thereon and the payment of royalties, as well as the remittance of profits abroad.
Enrollments with the Brazilian Central Bank and Brazilian Tax Authorities, as well as the registration of financial operations must be carried out by the investor´s local representative, appointed by means of a power-of-attorney.
Appropriate counseling with a Brazilian lawyer prior to implementation of any international operation involving the flow of foreign capital to Brazil is a must, preventing mistakes that can result in fines, saving time and money and ensuring compliance with local rules.
Compliance with Exchange Controls is less complicated than it might seem above, but it is essential that these controls be taken into consideration when planning financial operations involving a Brazilian investment vehicle, especially since they will have an impact on the timing of such operations.
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