Foreign Investments and Brazilian Tax Regime - SB Eventos · UM NOVO ESCRITÓRIO PARA UM NOVO MERCADO 1 Foreign Investments and Brazilian Tax Regime André Ricardo Passos May/2010

www.buranello.com.br1UM NOVO ESCRITÓRIO PARA UM NOVO MERCADO

Foreign Investments and Brazilian Tax Regime

André Ricardo Passos

May/2010www.buranello.com.br


1

2

Agenda

Brazilian Macroeconomics

Legal Regime

Taxation Regime3


1

Agenda

Brazilian Macroeconomics


Direct Foreign InvestmentNet Values

Brazilian Central Bank’s estimate – 50 mm


Public and Private Companies

2,3%

Financial Institutions

9,35% Individuals25.41%

Institutionals34,6%

Foreign Investors28,26%

Foreign InvestmentInvestments in Portfolio


2

Agenda

Legal Regime


Legal Regime Foreign Investment

Article 172 – Federal Constitution:

The law will establish, based on national interest, on the foreign capital investment, promote the re-investment and regulate the remittance of profits.


Legal Regime Foreign Investment

Law 4,131/62 - Investments in closely-held companies.

Article 1 - Foreign capital for the purposes of this law is considered the property, machinery and equipment that enter Brazil with no initial disbursement of foreign currency, for the production of goods or services, as well as the resources or money, for application in economic activities since, in both cases they belong to individuals or legal entities resident, domiciled or headquartered abroad.

Article 2 - To the foreign capital will be dispensed to the same legal treatment given to national capital on equal terms, being forbidden any discrimination.


Legal RegimeForeign Investment

Foreign Partner

- Art. 119, Law 6,404/76 – The partner domiciled abroad must have an attorney-in-fact in Brazil with powers to receive service of process.

-According to Brazilian Federal Revenue, foreign partners must be enrolled with the CPF or CNPJ, as applicable.

- Registration with Brazilian Central Bank is required in order to enable remittance of funds.



Foreign Partner

- Brazilian companies must have at least 2 (two) partners;

- Officers of Brazilian companies must be resident in Brazil. The members of the Board of Directors, in the other hand, can be resident abroad since they indicated an attorney-in-fact in Brazil.



Resolution CMN 2,689 - Investment in publicly-held companies or other in financial and capital market.

Investments carried out in the Brazilian financial and capital markets (including agribusiness bonds) by foreign investors, which monies enter the country as per the free rate currency exchange market



Foreign Investor’s obligations

-Appoint a legal representative in Brazil;

-Select a custodian agent (entity authorized to provide such services by Bacen or CVM);

-Require an enrollment with CVM;

-Select a Brazilian bank authorized to operate in the capital market for foreign currency exchange.


3

Agenda

Taxation Regime


Agenda

• Brazilian tax regime;

• International tax affairs;

• Business income;

• Passive income;

• Capital gains; and

• Foreign investors effects.


Brazilian Tax Regime

- Constitutional matter since 1988 (articles 145 to 162);

- Federation;

- Tax Code from 1966; and

- Civil Law Regime.


International Tax Affairs

- Brazil is not an OECD member country;

- Only 29 Double Taxation Treaties;

- Source of income regime; and

- Non cooperative Jurisdictions (Tax haven)

Black list almost similar to OECD black list.


Business Income

Agribusiness Companies

13.73% up to 81.25%TOTAL

GATT – (depending on the product’s origin)II – Import Duty

TIPI – (depending on product’s classification)IPI - Industrialized Products Tax

7% or 12% (interstate) or 18% (maximum rate)ICMS - Value-Added Tax

3% (cumulative) or 7.6% (non-cumulative)COFINS - Contribution for Financing of the Social Security

0.65% (cumulative) or 1.65% (non-cumulative)PIS/Pasep - Contribution to the Social Integration Plan

1.08% - 2.88% (gross income) or 9% (real profit)CSLL - Social Contribution on Net Profits

2% - 8% (gross income) or 25% (real profit)IRPJ - Corporate Income Tax

RATE TAX DESCRIPTION


Business Income

Payroll Taxes

2.85% (gross income) or 20% (payroll)INSS - Social Security Employers Contribution

17.65% up to 36.8%OVERALL RATE

8% (payroll)FGTS - Unemployment Guarantee Fund

1%, 2% or 3% (depending on risk’s degree)

SAT - Working Accidents Insurance

0.6% (payroll)SEBRAE - Contribution to the Brazilian SmallBusiness Services Support

1.5% (payroll)SESC - Contribution to the Institute of Commerce Social Service

1% (payroll)SENAC - Contribution to the National Industrial Apprenticeship Service

0.2% (payroll)INCRA - Contribution to the National Institute of Colonization and Political Agrarian Restructure

2.5% (payroll)SE - Contribution to the Education Salary

RATETAX DESCRIPTION


Passive Income

- Dividends

- Since 1996 dividends remittance abroad is exempt from withholding tax.


Interests

- 15% withholding tax

- 25% withholding (tax havens)

- Provisional Measure 472/09

1. Thin capitalization rules

2. Non Cooperative Jurisdiction

3. Limits of deductibility for the lenders

Passive Income


- 15% withholding taxes (general rule);

- Income derived from 2.689 portfolio;

- Stock exchange or public registered transaction: exempt;

- FIP: 15% or zero.

Capital Gains


IOF

- Exchange operations of inflow of funds by foreign investor (financial and capital market): 2%.

- Exchange operations of flowback of sources from foreign investments in stock and exchange market, futures and commodities exchange, shares investment funds: 0%.

- Transactions with bonds or securities: maximum rate of 1.5% a day, but for agribusiness bonds is applicable exemption or 0% rate.


- US and European investors (tax credit);

- Specific rules addressing specific situations under double taxations agreements.

Foreign Investors effects

www.buranello.com.br24UM NOVO ESCRITÓRIO PARA UM NOVO MERCADO www.buranello.com.br

RENATO BURANELLO ANDRÉ RICARDO [email protected] [email protected]

www.buranello.com.br

SÃO PAULO RIBEIRÃO PRETO GOIÂNIAAvenida Cidade Jardim, 377 Avenida Braz Olaia Acosta, 727 Avenida 136, 960Sobreloja Conjunto 607 Conjunto 603CEP 01453-900 CEP 14026-040 CEP 74180-040São Paulo – SP – Brasil Ribeirão Preto – SP – Brasil Goiânia – GO – BrasilTel: ++ 55 (11) 3077-4888 Tel: ++ 55 (16) 3911-1419 Tel/Fax: + 55 (62) 3941-6623Fax: + 55 (11) 3077-4890 Fax: ++ 55 (11) 3512-7119

Documents

Foreign Investments and Brazilian Tax Regime - SB Eventos · UM NOVO ESCRITÓRIO PARA UM NOVO MERCADO 1 Foreign Investments and Brazilian Tax Regime André Ricardo Passos May/2010