Foreign investment – Registration and obligations with Bacen

29/04/2019

ARTICLES

Foreign investment - Registration and obligations with Bacen


It is all the capital contribution coming from abroad that is applied in the domestic productive structure of a Country. In the form of equity interest in existing companies or in the creation of new companies, it is called Foreign Direct Investment (FDI). Considered the "good investment", as the resources go to productive capital (construction of plants, infrastructure, loans and mergers and acquisitions, etc.), decreased 12% in 2018 in Brazil, according to a Global Investment Trends Monitor survey released by the United Nations Conference on Trade and Development (UNCTAD). 2019 is a year for the government to work on attracting investors.

In general, there are no impediments for a foreign investor to make business in Brazil, respecting certain formalities. However, there are situations of prohibition (activities related to nuclear energy, postal and telegraph services and the aerospace sector, for example), restriction or need for a prior authorization request for foreign capital interest (financial institutions, communication companies, mining sector etc.).


Registration of capital

Foreign capital in Brazil is registered with the Brazil’s Central Bank (Bacen), on a declaratory and individualized basis, in foreign or domestic currency. Registration is mandatory and must be made before the first funds inflow in Brazil. However, firstly, the investor should be registered with CADEMP (“Cadastro de Empresas”), a Bacen’s area that manages individuals or legal entities, residents and non-residents information, as well as their representatives.

The registration of foreign capital entered in Brazil is electronically made at Sisbacen - Central Bank Information System, at the Electronic Report Registration (RDE) system, which has specific modules:

    - Foreign Direct Investment (FDI),

    - Registration of Financial Operations (ROF), and

    - Financial and Capital Markets (Portfolio).


Obligations foreign investors

    1 - Corporate structure management

    1.1 - Periodic updates

The occurrence of an event that amends the foreign investor's ownership interest requires an update within thirty days.


    1.2 - Annual update

Brazilian companies receiving foreign direct investment with assets or equity up to BRL 250,000,000.00 must annually update the information related to the base date of December 31 at the RDE-IED module by March 31 of the year following, of the items:

- Equity and paid-in capital amounts of the receiving company;

- Capital amounts paid-in by each foreign investor included in the registration, detailing the legal basis of each registered information.


2 - Economic and Financial Report (DEF)

Companies receiving foreign direct investment must pay attention to the filing of this report, as follows:

- Brazilian companies receiving foreign direct investment with assets or equity equal to or greater than BRL 250,000,000.00 must provide the DEF, according to the following schedule:

    for the base date of March 31, must be provided by June 30;

    for the base date of June 30, must be provided by September 30;

    for the base date of 30 September, must be provided by 31 December;

    for the base date of December 31, shall be provided by March 31 of the following year.


3 - Census of Foreign Capitals in Brazil

In the census, the information on foreign assets and values that are located in Brazil is provided to Bacen. It is mandatory for individuals and legal entities resident, domiciled or headquartered in Brazil, which fit the situations below, either yearly or five-yearly:

    3.1 - Annual Census

Refers to the base dates of the years in which the five-year census does not occur and is mandatory for:

- The legal entities headquartered in Brazil, with direct interest of non-residents in their capital, in any amount, and with equity equal to or greater than the equivalent to US$ 100 million, on December 31 of the base year;

- Investment funds with non-resident shareholders and equity equal to or greater than the equivalent to US$ 100 million, as of December 31 of the base year, by means of their management board; and

- Legal entities headquartered in Brazil, with total outstanding balance of short-term commercial credits (payable within 360 days) granted by non-residents equal to or greater than the equivalent to US$ 10 million, on December 31 of the base year.


    3.2 - Five-Year Census

It refers to base dates of years ending at zero (0) or five (5), and is mandatory for:

- Legal entities headquartered in Brazil, with direct interest of non-residents in their capital, in any amount, on December 31 of the base year;

- Investment funds with non-resident shareholders, as of December 31 of the base year, by means of their management board; and

- Legal entities headquartered in Brazil, with total outstanding balance of short-term commercial credits (payable within 360 days) granted by non-residents equal to or greater than the equivalent to US$ 1 million, on December 31 of the base year.


For both types of census, the deadline to submit them is from July 1 and to 6:00 p.m. of August 15 of the following year. If the deadline coincides with a non-working day at Bacen, the deadline is extended to 6:00 p.m. on the first following working day.

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