Foreign Investments in Brazil – Informing the Ultimate Beneficial Owner
Definition of Ultimate Beneficial Owner
Legal entities domiciled in Brazil and foreign legal entities that hold certain assets in Brazil (including equity, real estate properties, vehicles, aircrafts and financial investments) are required to inform their ultimate beneficial owners (UBOs) to the Brazilian Internal Revenue Services – IRS (Receita Federal Brasileira – RFB) in accordance with Normative Instruction RFB No. 2119/2022.
Normative Instruction RFB No. 2119/2022 defines an ultimate beneficial owner as:
(1) the natural person who, directly or indirectly, ultimately owns, controls, or significantly influences the entity; or
(2) the natural person on whose behalf a transaction is carried out.
A significant influence over the entity domiciled in Brazil is presumed when the natural person:
(1) directly or indirectly holds more than 25% of the entity’s corporate capital or voting rights; or
(2) directly or indirectly, acting individually or jointly with other persons, holds or exercises dominance in corporate decisions and the power to appoint the majority of the entity’s officers/administrators, even if without controlling the entity.
In the case of trusts, the ultimate beneficial owners are the settlors, officers/administrators, trustees, beneficiaries, and any other natural person who exercises the effective final control over the trust.
Deadline for Reporting
The ultimate beneficial owners need to be informed to the Brazilian IRS within 30 days as from the date of registration of the applicable entity with the Brazilian Corporate Taxpayer’s Registry (Cadastro Nacional da Pessoa Jurídica – CNPJ).
Required Documents
The process of informing the UBOs to the Brazilian IRS includes submitting to the tax authorities the following documents:
- apostilled copy of the foreign entity’s articles of incorporation / certificate of incorporation (or equivalent) showing the company’s name, address and officers/administrators;
- apostilled copy of a certificate that proves the current corporate structure of the corporate capital of the foreign entity;
- apostilled copy of document indicating the representation powers held by the foreign entity’s legal representatives in the country of origin;
- apostilled power-of-attorney granted by the foreign partner to an attorney-in-fact residing in Brazil;
- apostilled copy of the identification document or passport of (a) the foreign entity’s legal representative in the country of origin and (b) the foreign entity’s UBOs, if they do not have a Brazilian tax ID for natural person (Cadastro de Pessoa Física – CPF); and
an organizational chart indicating the foreign entity’s UBO.
Penalties for Non-Compliance
Entities that fail to report their ultimate beneficial owners to the Brazilian IRS may have their tax ID / CNPJ suspended and be prohibited from transacting with financial institutions, including for purposes of transferring funds.
MMR – Mastrocola Marcondes Rocha Advogados is fully prepared to assist its clients, including foreign investors, in all matters involving corporate law. Our lawyers’ broad experience both in Brazil and abroad (our partners have been representing foreign clients for over 20 years) allows us to provide our clients customized solutions for each of their particular needs, objectives and challenges. Contact us to learn more.