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The obligation of the brazilian Federal Revenue to indicate the final beneficiary of foreign entities ends on 12/31/2018

November / 2018

Normative Instruction nº 1634 ("IN 1634/2016") of the Brazilian Federal Revenue, which introduced several changes in the National Registry of Legal Entities (CNPJ), establishes the obligation of identifying the final beneficiary of foreign entities.

The entities required to inform the Internal Revenue Service of their final beneficiaries are: (a) clubs and investment funds; (b) foreign-based entities that, in the refereed Country are holders of property rights; vehicles; vessels; aircraft; bank current accounts; investments in the financial or capital market; or equity interests established outside the capital market; (c) foreign-based entities, that, in the Country, that carry out foreign leasing; chartering of vessels; rental of equipment and operating lease; import of assets without exchange coverage, destined to capital contribution in Brazilian companies; foreign banks that carry out foreign currency purchase and sale transactions with banks in the country, receiving and delivering cash in kind in the settlement of foreign exchange transactions; (e)  special partnership (SCP) linked to ostensible partners; and (f) holders of funds domiciled abroad.

The obligation is to include in the registration database of the CNPJ/MF the legal entities subject to provide information, of the data of the entire chain of equity holdings and persons authorized to represent them, up to the level of the final beneficiary, which was defined as: (i) natural person(s) who directly or indirectly has significant control or influence on the entity; or (ii) natural person natural person in whose name a transaction is conducted.

Article 8, paragraph 2, of IN 1.634 defines that "significant influence" is assumed when the natural person owns more than 25% (twenty-five percent) of corporate capital of a foreign entity, directly or indirectly; or exercises the preponderance in the social deliberations and the power to elect the majority of the officers of the foreign entity, directly or indirectly, although without controlling it. The information provided should cover the natural persons authorized to represent them, their controllers, managers and directors, if any, as well as the individuals or legal entities in favor of which these entities have been formed and the Members and Managers Board (QSA) through the program called COLETA WEB of the Federal Revenue of Brazil.

The providing of this kind of information has become mandatory since July 1, 2017. Entities who have already registered the CNPJ, prior to July 1, 2017, must indicate the final beneficiary when proceeding with any change in the CNPJ of the foreign entity.  Those who will not make any changes, must present the information until December 31, 2018. The procedure provides the submitting of a digital dossier, with corporate documents that corroborate with the information.

We forewarn, those who not declare their final beneficiaries may have their CNPJ suspended. In this case, they might be prevented from transacting banks accounts, financial application and eventually further loans.

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