Ultimate Beneficial Owners: learn more about this reporting obligation

Domestic and foreign entities must report their UBOs to remain in good standing with the National Registry of Legal Entities

Ultimate beneficial owners (UBO) have been attracting the attention of tax authorities worldwide, with the focus of ensuring greater transparency in financial transactions and preventing the concealment of business data.

In Brazil, the Federal Revenue Service requires that domestic and foreign entities provide information on their ownership structure to identify their UBOs. Hence, companies and organizations should be mindful of the rules in force and put the necessary measures in place to ensure compliance and avoid legal risks.

Check out below a few important aspects related to this requirement:

What is an UBO?

The Brazilian Revenue Service defines a ultimate beneficial owners (Pt: ‘beneficiário final’) as the natural person on behalf of whom a transaction is carried out by the company or who, directly or indirectly, ultimately owns, controls, or exerts significant influence over the entity.

This influence is presumed if an individual holds more than 25% of the company's ownership and voting rights, or if he or she holds significant power over the business decisions, being able to appoint the majority of the entity’s administrators, even without direct control.

It should be noted that there are specific rules for identifying UBOs in silent partnerships and trusts. In the case of silent partnerships, all general and silent partners – be they individuals or companies –, are considered UBOs, regardless of their ownership stake. As for trusts, they must report information on all beneficiaries, settlors, administrators, trustees, and any other individual who ultimately controls the instrument.

What legal entities are required to comply with this requirement?

Domestic entities

Broadly speaking, all business entities headquartered in Brazil are required to report their UBOs. This requirement also extends to Silent Partnerships and investment clubs and funds incorporated under the rules set out by the Brazilian Securities Commission (CVM).

Some entities, however, are exempt from this obligation on the grounds that all their information has already been publicly disclosed or that their owners or most influential shareholders also double as their UBOs. Such is the case of publicly held companies, sole proprietorships, and entities consisting exclusively of individuals, with one of them holding more than 25% of the company’s ownership.

Foreign entities

Depending on their business activities, entities headquartered abroad are required to be registered with the Federal Revenue Service (RFB), the Central Bank of Brazil (Bacen), or the Brazilian Securities Commission (CVM). Refer to the table to below to see how UBO reporting should be handled for each case:

Authority responsible for the corporate register	Entities required to report their UBOs
Federal Revenue Service (RFB)	Entities that, in Brazil, 1) hold rights on real estate; vehicles; vessels; aircrafts; bank checking accounts; investments in financial or capital markets; or 2) hold ownership stakes outside the stock market.
Central Bank of Brazil (Bacen)	Entities that, in Brazil, 1) carry out transactions related to international leasing; ship chartering, rental of equipment, and lease agreements; 2) import goods without forex hedge with the purpose of paying up the capital of a Brazilian company; or 3) provide security consulting services.
	IBanking institutions that trade foreign currency with banks in Brazil, exchanging Brazilian reais (BRL) in cash when settling forex transactions.
Securities Comission (CVM)	Entities and funds exerting a significant influence over a domestic entity, with more than 20% of the company’s ownership or with preponderance in its corporate decisions or power to appoint the majority of its directors.
	Other collective investment funds or entities, such as those that make investments in the country's financial and stock markets by means of investment vehicles.
	Trusts or other fiduciary instruments, companies formed by means of bearer bonds, and other legal entities incorporated or organized abroad not exempt from reporting their UBOs under the rules in force.

Non-existence of UBOs

It should be noted that Brazilian entities do not need to supply any information if they do not have UBOs.

On the other hand, entities headquartered abroad must, under all circumstances, report the inexistence of individuals in this condition.

Deadline and penalties

Since January 1, 2023, entities have been required to provide information pertaining to their UBOs (or lack thereof) within 30 days of their registration with the National Registry of Legal Entities (CNPJ).

Those who fail to comply or do not submit the supporting documents on time will have their CNPJ registration suspended, being prevented from carrying out banking operations, such as transactions with checking accounts, financial investments, or loans.

Read more: Federal Revenue Service brings corporate registration procedures up to date

What about eventual changes in ultimate beneficial owners?

So far, the regulation in force only requires UBOs to be identified following the company’s registration with the CNPJ, making no mention of subsequent changes. In fact, once a company is running as a going concern, it is possible to identify its UBOs by analyzing its loan and financing documents and the changes made to its articles of incorporation and ownership structure, which must be reported through other ancillary obligations.

However, nothing prevents information on subsequent changes in UBOs from being required in the future with the enactment of new rules.

Compliance with reporting obligations

Domingues e Pinho Contadores assists domestic and foreign companies in supplying documents and information to government authorities, ensuring business compliance. You can count on our support:dpc@dpc.com.br.