Requirements for foreign individual shareholder’s interest in Brazilian companies

The current Brazilian policy has been paving the way for a scenario with less investor barriers, which is attractive to individuals from other countries who are looking for good business opportunities here.

The ongoing simplification and bureaucracy measures generate expectations for new investments, but the recovery of confidence and the improvement in Brazil's performance as a target for foreign resources flow also require the consolidation of the economy, which must be more viable and stable.

In order to be successful in its projects and investments in productive capital, the foreign partner must consider not only the current economic scenario and forecasts of progress, but also the local rules and standards related to its condition.

Foreign individual partner opening a Company

A foreign citizen may incorporate or have interest in companies in Brazil, whether or not living in Brazil, if it meets certain issues. In any case, remember, the foreign citizen should register with the CPF.

1. Foreign partner non-resident in Brazil

The first issue to emphasize is that the person residing and domiciled abroad, who wishes to become a partner or holder of a Brazilian company, must grant powers to a proxy, who may be Brazilian or a foreign citizen (as long as this person resides in Brazil).

This proxy will represent the company before the Central Bank and the Federal Revenue, being the full holder of powers for the resolution of issues of interest to the grantor, including the responsibility to answer for administrative proceedings or legal actions related to the company.

A non-resident individual in Brazil may not work as executive officers or managing director, but their participation in the board of directors is not impeded under any circumstances.

It is foreseen to start a company with foreign partners only, if the operation of the business is limited to the branches allowed by law, since there is a restriction to hold interest in foreign capital in some areas. It is noteworthy that some restrictions are being changed, such as holding interest in foreign capital in the passenger air transport market.

2. Foreign partner resident in Brazil

The foreign individual resident and domiciled in Brazil interested in become a holder, partner or managing director of a national company must prove a permanent visa before the Commercial Boards. Thus, the foreign individual can proceed with the formalities to establish business in Brazil and even be the company’s managing director.

See also: Starting a business: learn the steps and what might change in 2019

Obligations of an individual resident in Brazil

Foreign individuals living in Brazil are required to annually report the Income Tax Return (DIRPF) to the RFB. This taxpayer should be aware of situations that may represent omission or generate double taxation.

The foreign citizen who has a permanent visa in Brazil, valid from the moment of his arrival, is considered a tax resident. This person is also required to present the Final Departure from Brazil Report and Final Departure from Brazil Statement, if returning to live abroad.

If the foreign citizen enters into Brazil with a temporary visa, this person will only be considered a tax resident owning an employment relationship, permanent visa (residence permit) or if staying in Brazil for over than 183 days, consecutive or not, within 12 months.

Foreign Investment in Brazil

Foreign productive capital is appreciated as it enables the creation of job opportunities and generation of income. Only certain specific business activities are prohibited or restricted for non-resident investments in Brazil.

Registration of investments in Bacen is required

It is noteworthy that the inflow of foreign capital in Brazil must be formal. The capital must be registered with the Central Bank on a reporting and individualized manner, in foreign or domestic currency, before the first inflow of funds to Brazil.

Investments are subject to Electronic Declaratory Register (RDE) at the Central Bank, in the Foreign Direct Investment (IED) module for which it is necessary that the resident and non-resident holders involved, as well as their representatives, are registered in the a CDNR - Non-Resident Declaratory Register.

Note:

It is important to note the requirement that fall on legal entities with direct interest of non-residents in their capital: to fill-out the Census of foreign capital in Brazil (information here).

Expert Advice for Foreign Partner Support

With specialized assistance, the foreign partner gains a competitive advantage by being more prepared to take the opportunity of business that should arise in Brazil at this moment of economic recovery.

Foreign citizens seeking opportunities in Brazil can count on the support of Domingues e Pinho Contadores’ Paralegal and Individual Departments for expert advice on opening businesses, investing productive capital in compliance with current standards and meeting the taxes obligations required by the local agencies.