Foreign Investments and Brazilian Tax Regime

Transcrição

1 Foreign Investments and Brazilian Tax Regime André Ricardo Passos May/2010 1

2 Agenda 1 Brazilian Macroeconomics 2 Legal Regime 3 Taxation Regime 2

3 Agenda 1 Brazilian Macroeconomics 3

4 Direct Foreign Investment Net Values Brazilian Central Bank s estimate 50 mm 4

5 Foreign Investment Investments in Portfolio Public and Private Companies 2,3% Financial Institutions 9,35% Individuals 25.41% Foreign Investors 28,26% Institutionals 34,6% 5

6 Agenda 2 Legal Regime 6

7 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. 7

8 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. 8

9 Legal Regime Foreign 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. 9

10 Legal Regime Foreign Investment 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-infact in Brazil. 10

11 Legal Regime Foreign Investment 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 11

12 Legal Regime Foreign Investment 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. 12

13 Agenda 3 Taxation Regime 13

14 Agenda Brazilian tax regime; International tax affairs; Business income; Passive income; Capital gains; and Foreign investors effects. 14

15 Brazilian Tax Regime - Constitutional matter since 1988 (articles 145 to 162); - Federation; - Tax Code from 1966; and - Civil Law Regime. 15

16 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. 16

17 Business Income Agribusiness Companies COFINS - Contribution for Financing of the Social Security ICMS - Value-Added Tax IPI - Industrialized Products Tax II Import Duty TOTAL TAX DESCRIPTION IRPJ - Corporate Income Tax CSLL - Social Contribution on Net Profits PIS/Pasep - Contribution to the Social Integration Plan RATE 2% - 8% (gross income) or 25% (real profit) 1.08% % (gross income) or 9% (real profit) 0.65% (cumulative) or 1.65% (non-cumulative) 3% (cumulative) or 7.6% (non-cumulative) 7% or 12% (interstate) or 18% (maximum rate) TIPI (depending on product s classification) GATT (depending on the product s origin) 13.73% up to 81.25% 17

18 Business Income Payroll Taxes INSS - Social Security Employers Contribution SESC - Contribution to the Institute of Commerce Social Service SEBRAE - Contribution to the Brazilian Small Business Services Support SAT - Working Accidents Insurance FGTS - Unemployment Guarantee Fund OVERALL RATE TAX DESCRIPTION SE - Contribution to the Education Salary INCRA - Contribution to the National Institute of Colonization and Political Agrarian Restructure SENAC - Contribution to the National Industrial Apprenticeship Service RATE 2.85% (gross income) or 20% (payroll) 2.5% (payroll) 0.2% (payroll) 1% (payroll) 1.5% (payroll) 0.6% (payroll) 1%, 2% or 3% (depending on risk s degree) 8% (payroll) 17.65% up to 36.8% 18

19 Passive Income - Dividends - Since 1996 dividends remittance abroad is exempt from withholding tax. 19

20 Passive Income 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 20

21 Capital Gains - 15% withholding taxes (general rule); - Income derived from portfolio; - Stock exchange or public registered transaction: exempt; - FIP: 15% or zero. 21

22 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. 22

23 Foreign Investors effects - US and European investors (tax credit); - Specific rules addressing specific situations under double taxations agreements. 23

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