Foreign direct investment in Brazil: how to register and report capital

Investors and recipients of investments should be mindful of FDI-related requirements

Business-wise, Brazil may seem attractive for companies and individuals based overseas, but attention should be paid to aspects related to foreign direct investment (FDI), particularly with regard to the registration of inflows and capital reports.

When planning to invest in Brazil, investors should get a good grasp of the country’s environment and learn more of the details and procedures in force by seeking the support of local partners who can help them in the decision-making process. Check out a few key points below:

What is Foreign Direct Investment?

According to the Central Bank of Brazil (Bacen), foreign direct investment is: "a direct ownership stake held by a non-resident for tax purposes in the capital of a Brazilian company, or any other economic right held by a non-resident stemming from a legal act or agreement whenever the yields depend on the performance of the business".

Brazilian companies may receive foreign investment from both non-resident individuals and entities not based in Brazil.

Investments can be made upon business formation or expansion, mergers and acquisitions, reinvestment of profits from overseas operations, among other ways.

An aspect that is key to identifying an FDI is its intention of staying long-term in the country and its acquisition outside over-the-counter markets and stock exchanges. In other words, an FDI differs from speculative investments, as the latter are defined by withdrawals made in reaction to fluctuations and unforeseen events.

Entry of foreign capital

The entry of foreign capital in Brazil must be formalized through conventional banking procedures. Foreign capital can enter freely, with only a few exceptions and restrictions in place.

As per the Federal Revenue Service regulations, all direct foreign investors must be registered with the National Registry of Individual Taxpayers (CPF) or with the National Registry of Legal Entities (CNPJ), depending on whether they are individuals or companies.

Provided that certain requirements are met, non-residents are, broadly speaking, allowed to invest in the same instruments available to residents in Brazil, with only a few restrictions.

Foreign ownership is forbidden in the following activities:

• activities involving nuclear energy;
• health care (except in cases prescribed by law);
• postal and telegraph services;
• aerospace industry (launching and positioning of satellites, vehicles, aircrafts or commercialization of said items, but the prohibition does not extend to their manufacture or negotiation).

Foreign ownership is restricted in the following activities:

• acquisition of farmland and of lands along national borders;
• financial institutions;
• exploitation of public air services;
• ownership of newspapers, radio stations, television channels, magazines and other publications;
• mining sector.

Registration of foreign capital

Even before entering the country, whether through individuals or companies, all foreign investment must be registered with the Central Bank.

This registration must be carried out using the System for Provision of Information on Foreign Direct Investment (SCE-IED).

Periodic statement of FDI capital

Investments must be reported in a number of situations, which include transfers of money and funds equal to or exceeding USD 100,000 or its equivalent in other currencies.

Recipients whose total assets exceed the reporting threshold are required to file statement with the Bacen:

Type of statement	Companies required to file the statement	Base date	Due date
Quarterly	Companies with total assets amounting to BRL 300 million or more, on the base date of the quarterly statement	March 31	Up to June 30
		June 30	Up to September 30
		September 30	Up to December 31
Annual	Companies with total assets amounting to BRL 100 million or more	December 31 of the previous year	Up to March 31 of the following year
Quinquennial	Companies with total assets amounting to BRL 100,000 or more	December 31 of calendar years ending in 0 or 5 Annual statements must not be filed in years where a quinquennial statement is due.	Up to March 31 of the following year

Periodic Statements must be filed using the Economic-Financial Statement (‘Declaração Econômico-Financeira’ - DEF) function available on the System for Provision of Information on Foreign Direct Investment (SCE-IED).

Associated penalties

Failure to file the periodic statements or supplying false, incomplete, misleading, or untimely information warrants a fine of up to BRL 250,000.

FDI with specialized support

DPC offers all-round solutions to provide support for foreign investors and recipients of investments, walking them through all registrations and statements required by the Central Bank of Brazil. Talk to our experts: dpc@dpc.com.br.