Page 103 - InvestmentGuideBrasilEng

TAXES ON FOREIGN CAPITAL
NO RESTRICTIONS sectors, foreign capital may be subject
? Restrictions – in the following
ON MOST FDI to limitations or may require pre-
authorization from public authorities:
Foreign capital may freely enter Brazil and is not » Acquisition or rental of rural property
subject to prior approval by the government and (may require authorization from the
there are no conditions in respect of the total National Institute for Colonization and
amount of investment that can be made in Brazil, Agrarian Reform - INCRA or, in the case of
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with a small number of exceptions: large purchases, the National Congress);
? Prohibitions: » Financial institutions;
» Activities involving nuclear energy; » Air transportation companies (the operation
of passenger air transportion services is subject
» Healthcare services (unless an exception to concession – under current legislation a
is expressly provided for by law); concession contract can only be awarded to
Brazilian-registered companies in which at
» Mail and telegraph services; and least 80% of the voting capital is in the hands
of Brazilians – entry of foreign capital is capped
» Aerospace (launch and deployment at 20% of ordinary shares in the company);
of satellites, vehicles, aircraft or the
commercialization of these goods, » Media, including television networks,
but the prohibition does not apply to magazines, newspapers and radio
manufacturing or trading these goods). broadcasting stations (the government
prevents foreign investment in the ownership
and administration of media – legislation
stipulates that at least 70% of the total capital
of media companies must be owned directly
or indirectly by Brazilians born in Brazil or
naturalized for more than ten years); and
» Mining sector.
4 Acronym in Portuguese.
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REGISTERING FOREIGN Foreign capital that enters Brazil as FDI is not
CAPITAL subject to any taxation. However, intercompany
loans will be subject to the federal Tax on Credit,
Investors are required to register all inflows of for- Foreign Exchange, Bonds and Securities Transac-
tions and on Insurance Operations (IOF ) at a rate
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eign capital into Brazil with the Brazilian Central (which can be reduced to 0%) that varies depend-
Bank within 30 days of the funds entering Brazil. ing on the sector, the length of investment and
This can only be done online through the Brazil- other aspects. Even though intercompany loans
ian Central Bank’s e-registration tool, RDE-IED are classified as FDI, The Federal Revenue Service
(Electronic Declaration Registry), which is part of (SRF ) considers this kind of investment a normal,
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the Brazilian Central Bank’s Information System interest-bearing financial transaction that is sub-
(SISBACEN). ject to the same IOF rates as domestic investors.
The recipient company of FDI and the foreign The remittance of profits and dividends and
investor (through a representative) are responsi- the repatriation of the foreign capital abroad are
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ble for registration. exempted from the Withholding Income Tax (IR )
An unregistered investment is not eligible for when leaving Brazil. But this only applies if the
repatriation and dividends or profits generated by sum of the capital to be sent abroad is the same
it cannot be remitted abroad through the com- as the sum that was registered with the Brazilian
mercial foreign exchange market. Central Bank. Capital repatriated in an amount
However, it is important to note that nothing greater than the initial amount registered will be
prevents the foreign investor from repatriating deemed a capital gain and be subject to a 15% or
or remitting dividends or profits abroad through 25% IR, unless otherwise provided by an applica-
the floating exchange market or transferring local ble tax treaty between Brazil and the other coun-
currency abroad to purchase foreign currency out- try involved.
side Brazil. When remittance or repatriation is not desir-
Apart from the aspects relating to registra- able, reinvesting profits is an option. Reinvest-
tion, repatriation and certain tax consequences, ment can be registered as foreign capital with the
an unregistered investment is subject to the same Brazilian Central Bank, thereby increasing the tax
rules applicable to registered investments. basis for calculating future divisions of capital.
More information on registering foreign cap- Finally, to stimulate FDI, Brazil has signed
ital can be found in Portuguese from the Brazil- Double Taxation Treaties (DDTs) with 28 coun-
ian Central Bank’s website: www.bcb.gov.br/pre/ tries. Check each convention document in
portalcidadao/cadsis/rde.asp?idpai=portalbcb its entirety at http://www.receita.fazenda.
A user guide to the Electronic Declaration gov.br/Legislacao/AcordosInternacionais/
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Registry, also in Portuguese, is available from the AcordosDuplaTrib.htm .
Brazilian Central Bank’s website: www.bcb.gov.
br/?RDEIED. 5 Acronym in Portuguese.
6 Acronym in Portuguese.
7 Acronym in Portuguese.
8 In Portuguese only.
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