Central bank changes the rules related to registration of foreign capital in Brazil

April / 2017

Resolution No. 4533 of November 24th  2016 and Circular No. 3,814 of December 7th 2017, both of the Central Bank of Brazil (“BACEN”), entered into force on January 30th 2017, changed the rules related to the registration of foreign capital in Brazil.

These changes aim to simplify and modernize the registration in the system of Electronic Declaratory Registration, Foreign Direct Investment (“RDE-IED”) module. For this reason, Vernalha, Di Lascio, Mesquita & Associados decided to describe the main changes brought by these regulations, as follows:

Liability for the Registry: Under the new BACEN rules, the responsibility for the declaratory registration of foreign investment is exclusively of the Brazilian company that receives the resources.

No need of Prior External Remittance Registration: The following operations do not need the registrations in the RED-IED module, once the information will be automatically transmitted to BACEN based on exchange operations or international transfer in reais: (i) currency inflow; (ii) conversion into foreign direct investment; (iii) transfer between modalities; (iv) international quota or share conference; and (v) remittances of funds made to the foreign investor due to distribution of profits, dividends, interest on own capital, capital reduction and disposal of shares.

Annual Update: In addition to the 30-day period to update the RDE-IED, in case of any event that changes the foreign investor's equity interest, the receiving companies with assets or shareholders' equity of less than R$ 250,000,000.00 must update in the RDE-IED module, until January 31st of each year, the information regarding the amounts of the shareholders' equity and of the paid-in capital stock of the receiver, as well as of the paid-up share capital of each investor.

Quarterly Economic-Financial Statements: On the other hand, Brazilian companies receiving foreign investment with assets or equity equal to or greater than R$ 250,000,000.00 must provide economic-financial statements to the BACEN, through the RDE-IED module, on a quarterly basis, on the following dates: (i) until May 31st for the base date of March 31st; (Ii) until August 31st for the base date of June 30th; (Iii) until November 30th for the base date of September 30th; and (iv) until February 28th of the subsequent year to the base date of December 31st.

Despite the above, there were no changes in relation to the registration obligations related to operations of foreign investment, which still depend on the RDE-IED registration as a condition for any changes. The following are some examples of operations that still depend on the registry: (i) contribution of assets for capitalization of the receiving company; (ii) corporate reorganizations of receiving companies; and (iii) capitalization of profits, as well as the conference of shares/quotas held by foreigner in receiving company for the payment of subscribed capital in another national company.

It is important to remember that the lack of registration, the provision of incorrect information or the delay in the declarations will result in the application of the pecuniary penalties set forth in CMN Resolution 4.104/12.

The new Electronic Declaratory Registration Manual of the RDE-IED Module is now available for consultation on the BACEN website, at the following link: infecon/RDE/ManualRDE-IED.pdf.          

Vernalha, Di Lascio, Mesquita & Associados is at the disposal of its clients for more information on the subject.