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Brazilian Federal Revenue Office Creates Obligation to Provide Detailed Information on the Corporate Structure.

In May 2016, the Brazilian Federal Revenue Office published Normative Instruction No. 1.634 with new regulations concerning the Corporate Taxpayer´s Register (Cadastro Nacional da Pessoa Jurídica – “CNPJ”).

The Brazilian Federal Revenue Office is responsible for regulating the registry of every legal entity in Brazil, including, but not limited to, foreign companies that own rights in Brazil regarding real estate, vehicles, vessels, airplanes, bank accounts, investments in the financial and capital markets, and equity participation in Brazilian companies, among others. This registration is mandatory for all Brazilian and foreign companies that invest in Brazil.

Among the rules provided by Normative Instruction No. 1.634, of particular importance are those connected with the obligation to provide detailed information on the corporate structure of registered entities. From January 1, 2017, on, companies will be demanded not only to present documents regarding the individual authorized to represent them, but also to disclose the full corporate chain through to its final beneficiaries.

A final beneficiary is the individual who holds, controls or significantly influences the registered company, which is deemed to occur whenever he or she (i) holds, directly or indirectly, more than 25% of the corporate capital of the registered entity, or (ii) holds or exercises preponderance, either directly or indirectly, over the corporate decisions and has the power to nominate the majority of the company’s administrators, even though they may not control it. Also, the individual on behalf of whom a transaction is conducted is deemed as final beneficiary.

Such requirement of the corporate chain will come into force on January 1, 2017, and must be observed for the new registration of companies and the first updating of existing registrations. In relation to foreign companies, these regulations provide a 90-day term to present their final beneficiaries and required documents, counting from the filing of the request for a CNPJ. As to existing registries, companies must provide information concerning their final beneficiaries in the first registration update, or by December 31, 2018, whichever occurs first.

Companies that do not provide such information on their final beneficiaries to the Brazilian Federal Revenue Office may have their CNPJ suspended and may be prohibited from performing transactions with banks, including the use of bank accounts, the performance of financial investments, and the granting of loans. Such prohibition is not applied to transactions concerning return of the investment to its country of origin nor to the fulfillment of obligations assumed before the suspension.

With such information on the final beneficiary, the Brazilian Federal Revenue Office intends to prevent tax evasion, corruption and money laundering on a global scale.

Felsberg’s Corporate Law Department is available to assist clients on this matter. For more information, please contact: Claudia Maniaci (claudiamaniaci@felsberg.com.br), Anneliese Moritz (anneliesemoritz@felsberg.com.br), Gabriel Paranaguá (gabrielparanagua@felsberg.com.br) or Tatiana Bauer Poli (tatianabauer@felsberg.com.br).

FELSBERG ADVOGADOS

CORPORATE DEPARTMENT

 This article is of a solely informative nature, and does not contain any opinion, recommendation or legal advice from Felsberg Advogados concerning the subject matter covered.

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