The Brazilian Central Bank (“BACEN”), under Resolution No. 4,533, of 29th November, 2016 and Rule (Circular) No. 3,814, of 7th December, 2016 (amended in part by Circular No. 3,822, of 20th January, 2017) (the “Rules”), amended the rules regarding registration procedures of foreign direct investment in Brazilian companies on the BACEN electronic system, known by the acronym RDE-IED.
Among the modifications introduced, the most relevant are those related to: (i) the automatic registration of certain transactions; and (ii) the new reporting obligation of economic and financial information by Brazilian companies recipient of foreign direct investment.
With the enactment of the Rules, there are currently two foreign direct investment registration categories in the RDE-IED system: automatic and declaratory.
The following transactions/operations will be automatically registered in such system, based on the information contained in the relevant foreign exchange transaction or the international transfer of Brazilian reais (“BRL”): (a) foreign currency influx; (b) conversion of financial transactions (e.g. loans, importation of assets, among others) into foreign direct investment; (c) international transfer of quotas or shares for payment of corporate capital; and (d) international remittance of profits and dividends, interest on shareholders’ equity and capital repatriation.
In any event, Brazilian companies will have to register with the RDE-IED the following transactions/operations: (a) influx of assets for paying-in Brazilian corporate capital; (b) corporate restructuring (mergers or spin-offs) in which at least one of the companies has foreign capital (shares or quotas) registered with the RDE-IED system; (c) quotas or shares swap in Brazil; (d) transfer of quotas or shares of a Brazilian company held by a foreign investor to pay-in corporate capital of another Brazilian company; (e) reinvestment in the Brazilian company; (f) payment of profits and/or dividends, interest on shareholders’ equity and capital redemption resulting from the company’s liquidation which is reinvested in another Brazilian company, or used for payment in Brazil or overseas.
Furthermore, Brazilian companies recipient of foreign direct investment (“Brazilian Company(ies)”) must periodically update their net worth and paid-in corporate capital, or, alternatively, must inform their economic and financial information, pursuant to the requirements below.
With regard to the reporting obligation of net worth and paid-in corporate capital information, Brazilian Companies must periodically declare such information within the following deadlines: (a) within 30 days from the occurrence of any event that changes a foreign investor’s equity in a Brazilian Company (such obligation applies to both Brazilian Companies with assets or net worth less than, equal to or greater than BRL 250 million); and (b) by 31st March, referring to the base date of 31st December of the previous year, such obligation being applicable only to Brazilian Companies with assets or net worth of less than BRL 250 million.
In relation to Brazilian Companies with assets or net worth equal to or greater than BRL 250 million, the following annual schedule shall be observed for the delivery of economic financial statements: (i) by 30th June, in relation to the base date 31st March of the same year (ii) by 30th September, in relation to the base date of 30th June of the same year, (iii) by 31st December, in relation to the base date of 30th September of the same year, and (iv) by 31st March, in relation to the base date of 31st December of the previous year.
Please note that failing to report such information may result in penalties of up to BRL 250,000.00.
Since the deadline for submitting the first report on the economic and financial information ends on 31st March, 2017, we remain at your full disposal for any additional assistance.