On May 6, 2016, the Brazilian Federal Revenue Office issued the Normative Instruction No. 1634 (“IN 1634/2016”), through which imposed the obligation for entities incorporated in Brazil to provide information on the person authorized to represent them, on the respective chain of equity interest, until the individuals characterized as final beneficiary are found.

The IN 1634/2016 contains a list of information to be provided and documents to be delivered for such purpose. The provision of such record information and the delivery of the respective documents will be mandatory for foreign entities with investments in the Country that enrolled themselves with the CNPJ (National Corporate Taxpayers’ Register) as of July 1, 2017. The foreign entities already enrolled with the CNPJ before such date will have to follow this procedure upon amendment of their registration data with the CNPJ, no later than December 31, 2018.

On October 25, 2017, the procedure became mandatory also for Brazilian entities after publication of the ADE COCAD (Executive Declaratory Act – Registration Management General Coordination) No. 9/2017.

The entities that fail to follow this procedure may have their CNPJ enrollment suspended. In case of foreign entities domiciled abroad with property and rights in Brazil and financial institutions abroad that carry out foreign currencies purchase and sale transactions with banks in Brazil, in addition to the CNPJ suspension, may be hindered from performing transactions with bank institutions, operating checking accounts, making financial investments, and obtaining loans. These restrictions may, as a last resort, prevent the remittance of dividends to other countries or even the receipt of funds by means of a loan or capital injection from the respective parent companies abroad.

Brazilian financial institutions already require from their clients the provision of such information, based on Circular Letter No. 3.461/2009 of the Brazilian Central Bank. Often there is news of companies whose foreign partners threaten to close the bank accounts of those who fail to inform the respective final beneficiaries. We emphasize that the requirement contained in the IN 1634/2016 is additional to the regulation of the Brazilian Central Bank.

 

Please contact Tess Advogados’ tax and corporate teams for further information.

Carlo Lorusso: clorusso@tesslaw.com

Paulo Yamaguchi: pyamaguchi@tesslaw.com