2/5/2023
On December 31, 2022, the Central Bank published Resolution BCB No. 278 (“Resolution”), in order to regulate law No. 14,286 of December 29, 2021 (“Currency Exchange Law”), in relation to foreign capital in the country, in foreign credit operations and direct foreign investment, as well as providing information to the Central Bank of Brazil.
Modifications affect financial transactions. Although this article is focused on changes regarding records in the RDE-IED and RDE-ROF systems, there were also significant changes in other areas, such as: (i) the client (and no longer the financial institution) will be responsible for the classification/type of a foreign exchange transaction; (ii) the exchange rate codes were changed; (iii) the limit for purchases abroad was increased to USD 10,000.00 (ten thousand dollars), or equivalent in other currencies; (iv) some foreign currency exchange contracts will no longer require signature, among other changes.
Overcoming this macro information, it is important to highlight the main points regarding the provision of credit and investment information:
- Credits. The old Financial Operations Records (ROFs) will be replaced by records before the Foreign Capital Information Provision System – External Credit. This new registration will only be required for transactions in amounts above USD 1,000,000.00 (one million dollars), or the equivalent in other currencies, with no registration required for lower amounts, it being sufficient that the recipient of the funds, equipped with of the required documentation, enter into the exchange contract directly with your bank, which will determine what such supporting documentation will be, as each bank is free to do so.
- Investments, investments, investments. The old records before the Foreign Direct Investment System (RDE-IED) will be replaced by the records before the Foreign Capital Information Provision System for Foreign Direct Investment. This new system will require the registration of operations only when amounts greater than USD 100,000.00 (one hundred thousand dollars) are involved, or the equivalent in other currencies.
- Illustrating the case listed in item “b” above, in a first contribution, only if the value of the remittance exceeds USD 100,000.00 should there be a link with the Foreign Direct Investment (IED) – it should be noted that IED is a number that links the investor and investee – otherwise there will be no need to register and update it within the RDE-IED. Thus, in order to connect the investor to the creditor, the non-resident investor needs to have CPF/CNPJ to be part of the exchange contract linked to the Brazilian company, which is invested, only stating the nature of the exchange rate fact of Foreign Direct Investment. In this scenario, the capital control of the company in question must be conducted by the company itself in the corporate and accounting acts.
- In addition, in the diversified remittances of Foreign Direct Investment capital, any updating of the recipient’s information before the Central Bank of Brazil will only be necessary if the Brazilian company reaches the amount required to register.
- The correct capital value for investees that do not have circulation of funds in expressive amounts must be updated upon delivery of the Quarterly Statement, Annual Statement or in the Five-Year Statement, when applicable. Otherwise, remaining without reaching the values determined in each case, the recipient of foreign resources will not need to carry out any type of cadastral update.
- As for ordinary statements, the following obligations will be due from the base date December 31, 2022:
f.1) Quarterly economic-financial statement (DEF): recipients of external funds whose total assets equal to or are greater than R$ 300,000,000.00 (three hundred million reais) must present the DEF. The deadline for the DEF declaration of base date December 31, 2022, is March 31, 2023. The quarterly reference base dates are March 31, June 30, and September 30 of each year.
In this way, as of the enactment of the Resolution, the floor and the rule of mandatory delivery of the quarterly DEF were changed from recipients of foreign direct investment with net worth or total assets equal to or greater than R$ 250,000,000.00 (two hundred and fifty million reais) (previous rule), to direct foreign investment recipients who have total assets equal to or greater than R$300,000,000.00 (three hundred million reais) (new rule).
f.2) Annual Declaration: The annual declaration must be provided by the recipient of direct foreign investment that, on the base date of December 31 of the previous year, has total assets equal to or greater than R$100,000,000.00 (one hundred million reais).
In this way, as of the enactment of the Resolution, the floor and the rule of mandatory delivery of the Annual Declaration were changed from recipients of foreign direct investment with foreign participation in any amount, regardless of the value of the asset or net worth (previous rule), to direct foreign investment recipients who have total assets equal to or greater than R$100,000,000.00 (one hundred million reais) (three hundred million reais) (new rule).
f.3 ) Five-Year Declaration: The five-year declaration, whose base date is December 31 of the calendar year ending in 0 (zero) or 5 (five), must be provided by the foreign direct investment recipient who, on the base date of December 31 of the previous year, has total assets equal to or greater than R$100,000.00 (one hundred thousand reais), and the Annual Declaration is not due in the years in which the Five-Year Declaration is made. This Five-Year Declaration was not foreseen in the old regulation.
Thus, there is an even greater easing of exchange controls in Brazil, which began a gradual opening a few years ago and whose regulation has been evolving in this sense, which may lead to greater foreign interest in investments in Brazil, since there is less bureaucratization and a trend towards even greater openness.
On the other hand, the control that was previously more easily carried out via the Brazilian Central Banks’s system will not be as precise, which will oblige recipients of foreign capital – such as credit or investment – to have greater control of the currency received, which can cause some discomfort, given that, according to our experience, the internal controls of many fund recipients tend to be flawed, jeopardizing the correct relationship between corporate and accounting information.
To find out more information about the Resolution and the impacts on your operations, contact our team.
